ROCHESTER, NY - Home Properties announced that it has entered into a definitive agreement to be acquired by an affiliate of Lone Star Funds, in a transaction valued at approximately $7.6 billion, including the assumption of existing debt. Upon completion of the transaction, Home Properties will become a privately held company.
Under the terms of the Merger Agreement, Lone Star Funds will acquire all of the outstanding common stock of Home Properties for $75.23 per share in an all-cash transaction. The offer price represents a premium of approximately 9% over Home Properties' unaffected closing stock price on April 24, 2015, the last trading day prior to media reports on a potential transaction, and a premium of approximately 11% over the average closing price of Home Properties' common stock for the 60 days ended April 24, 2015.
"The Home Properties team has built a great company, as reflected by our strong platform, unique assets, and differentiated business strategy," said Edward J. Pettinella, President and Chief Executive Officer of Home Properties. "We believe this transaction with Lone Star Funds provides our stockholders with compelling value for their investment, consistent with our long-term strategy."
Hugh J. Ward III, Co-Head of Real Estate Investments at Lone Star Funds, added, "We are pleased to enter into an agreement to acquire Home Properties and look forward to working with their talented team to complete this transaction and integrate the Company's portfolio into Lone Star Funds' existing multifamily portfolio. This is Lone Star Funds' second large, recent apartment purchase following the 2014 acquisition of a 64 property, 20,439 unit portfolio, and is consistent with our strategy of buying primarily Class B apartments, including workforce housing, located in in-fill markets with strong underlying fundamentals."
Transaction with UDR, Inc. Concurrently with the execution of the Merger Agreement, Home Properties has entered into an agreement to contribute a portfolio of up to six properties containing as many as 3,246 units to UDR, a $13 billion, leading multifamily real estate investment trust with an investment grade rating, in exchange for a combination of cash and newly issued units of a newly formed subsidiary of UDR. In connection with this transaction, existing holders of partnership units of Home Properties, L.P. will have the opportunity to elect to exchange their Home Properties OP Units for 2.15 newly issued UDR DownREIT Units for each Home Properties OP Unit held, plus $3.01 in cash from Lone Star Funds.
Unitholders who elect to receive UDR DownREIT Units in the OP Merger will also receive new tax protection for a period of 10 years from the closing date, regardless of the current tax protection status of their Home Properties OP Units.
Prior to the Home Properties Merger and pursuant to the Merger Agreement, Lone Star Funds will acquire all of the Home Properties OP Units that are not owned by Home Properties and have not been exchanged as described above pursuant to a merger of Home Properties OP with a wholly owned subsidiary of Lone Star Funds (the "OP Merger"). In connection with the OP Merger, holders of Home Properties OP Units who have not exchanged their Home Properties OP Units as described above will receive $75.23 per unit in cash upon the closing of the OP Merger.
"We appreciate Home Properties and Lone Star Funds reaching out to create an opportunity for UDR to offer the Home Properties OP Unitholders an alternative that will allow them to continue to participate in the strong multifamily space and continued growth in UDR," said Tom Toomey, President and Chief Executive Officer of UDR.
Approvals, Anticipated Closing: The Board of Directors of Home Properties has unanimously approved the merger agreement and has recommended approval of the Home Properties Merger by the Home Properties stockholders and of the Home Properties OP Merger by the Home Properties OP unitholders.
The transaction is expected to close during the fourth quarter of 2015, subject to the approval of the Home Properties Merger by the Home Properties stockholders and the approval of the Home Properties OP Merger by the Home Properties OP unitholders.
Lone Star Funds has received $6.1 billion of fully committed financing from Goldman, Sachs & Co., and the transactions are not subject to a financing condition. Each of the transactions is subject to certain customary closing conditions.