American Homes 4 Rent and American Residential Properties announced that the Boards of both companies have approved a definitive agreement to combine the two companies in a tax-free merger at a total transaction value of approximately $1.5 billion.
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In the merger, American Homes 4 Rent will issue approximately 38 million common shares and assume or repay a total of approximately $0.8 billion of American Residential Properties debt. The merger is targeted to close during the first half of 2016.
Under the merger agreement, at closing, each share of American Residential Properties common stock and each limited partnership unit in its operating partnership will be exchanged for 1.135 common shares or limited partnership units of American Homes 4 Rent.
This is representing a current value per share/unit of American Residential Properties of $19.01 based on American Homes 4 Rent closing price on December 2, 2015, a 19.8% premium over the volume weighted average closing price of American Residential Properties common stock over the 20 trading days ending on December 2, 2015, and an 8.7% premium over American Residential Properties’ closing price on December 2, 2015. The exchange ratio is not subject to adjustment.
Upon closing, American Residential Properties stock and unit holders will own approximately 12.6% of the outstanding common shares and units of the combined company. One of the current American Residential Properties directors to be designated before the closing will join the board of American Homes 4 Rent.
The merger will enhance the size of the largest publicly-traded single-family rental company.
The combined company is expected to own more than 47,000 homes in 22 states and to have an equity market capitalization of $5.5 billion (based on American Homes 4 Rent’s closing price on December 2, 2015) and an aggregate real estate cost basis of over $8 billion.
Given the geographic overlap of American Homes 4 Rent and American Residential Properties portfolios, operational synergies are expected to be achieved by reducing duplicate expenses for internet charges, supervisory property management personnel, management information systems and other back-office functions. The merger is expected to be accretive to American Homes 4 Rent Core FFO.
American Homes 4 Rent will retain its corporate headquarters in Agoura Hills, California, while maintaining a presence in the Phoenix, Arizona market.
American Residential Properties’ chairman and chief executive officer, Stephen G. Schmitz, and its president and chief operating Officer, Laurie Hawkes, will remain with the company until the closing of the merger.
The merger is subject to majority approval of American Residential Properties stockholders and to customary closing conditions. Mr. Schmitz and Ms. Hawkes have agreed to vote their shares in favor of the merger. ■