21 August 2017

Blackstone’s Invitation Homes to acquire Starwood Waypoint

Invitation Homes has agreed to purchase Starwood Waypoint Homes in an all-scrip deal worth approximately USD 4.35 billion.  The offer implies a purchase price of USD 33.88 per share, representing a 0.8 per cent premium over the target’s close of USD 33.62 on 9th August, the last trading day prior to the bid being announced.

Under the terms, Invitation’s shareholders will own 59.1 per cent of the combined entity, with the remaining stake being held by Starwood’s owners. While the boards at both companies have given the green light, the transaction remains subject to approvals from stockholders.

The merger between the two New York Stock Exchange-listed real estate investment trusts will form a property group with market capitalisation of around USD 11,000 million and an enterprise value of about USD 20,000 million, according to their joint press release.

As a result of the deal, Invitation’s portfolio will grow to about 82,000 properties, making it the largest single-family rental provider in the US. Despite that, it is worth noting that the merged portfolio will account for only 0.5 per cent of the approximately 16 million single-family homes for rent in the country. 

Invitation Homes was formed by Blackstone Group, which, according to Forbes, invested about USD 9.60 billion to snap up almost 50,000 homes in the battered US real estate market following the 2007 subprime mortgage crisis. The subsequent economic recovery in the country prompted the property group to float its shares early this year. 

Proceeds from the initial public offering, which accounted for 25.5 per cent of Invitation’s enlarged capital, were aimed at funding working capital and repaying existing debts.

Starwood Waypoint now owns more than 30,000 single-family rental homes in the US following its USD 1.48 billion reverse-takeover of Colony American Homes last year.   

Commenting on the merger, Starwood’s chief executive Fred Tuomi said: “This merger creates the leading single-family rental company in the United States, which will be uniquely positioned to deliver exceptional service to residents, while also improving operating efficiency.” He also added: “We will have an irreplaceable portfolio of homes focused in select high-growth markets, offering unrivalled service and high-quality housing options for families choosing to rent.”

Invitation has appointed Deutsche Bank and JP Morgan as financial advisors to the deal, while Starwood Waypoint is being assisted by Morgan Stanley and Evercore Partners.

According to Zephyr, the M&A database published by Bureau van Dijk, the merger between Invitation and Starwood is the seventh largest acquisition of a residential buildings and dwellings lessor to have been announced so far. The biggest takeover by value on record within the same sector was Bank of America and Lehman Brothers Holdings’ purchase of Archstone-Smith Trust via an institutional buyout worth around USD 22.20 billion, which completed in October 2007.

© Zephyr