American Homes 4 Rent (AH4R) and American Residential Properties, Inc. (ARPI) both announced on Thursday morning plans to merge into a combined company that is expected to own and manage more than 47,000 residential single-family rental homes.
The merger is expected to enhance the size of the largest publicly-traded single-family rental company, Agoura Hills, California-based American Homes 4 Rent, which prior to the merger owned approximately 38,000 SFR properties.
“We are delighted to announce our agreement to combine with American Residential Properties, further establishing American Homes 4 Rent as the largest publicly-traded owner and operator of single family rental homes,” said David Singelyn, CEO of AH4R. “American Residential Properties has a high quality portfolio of homes which fit strategically in our markets, offering significant opportunities to capture further operating efficiencies on the combined platform. Moving ahead, we look forward to creating additional value for the shareholders of the combined company while strengthening our position as a premier company in the single-family rental sector.”
The boards of both companies have approved a definitive agreement for a tax-free merger. The total value of the transaction is approximately $1.5 billion. The merger is expected to close sometime in the first half of 2016. The total SFR home inventory of the combined company, which is expected to be more than 47,000 properties, covers 22 states and is expected to have an equity market capitalization of approximately $5.5 billion and an aggregate real estate cost basis of more than $8 billion.
The transaction was negotiated with a fixed exchange ratio of 1.135 shares of AH4R for each share of ARPI, and ARPI will merge into AH4R in a tax free exchange. ARPI shareholders will own about 13 percent of the combined company, according to the announcement from AH4R. Meanwhile, AH4R will retain its corporate headquarters in Agoura Hills, California, while maintaining a presence in the Phoenix, Arizona, market. AH4R senior executives will retain their roles and responsibilities after the merger is complete. ARPI Chairman and CEO Stephen G. Schmitz and ARPI’s President and Chief Operating Officer, Laurie Hawkes, will remain with the company until the merger closes. The merger is subject to majority approval by ARPI shareholders and customary closing conditions.
“We are excited to join forces with one of the largest and most successful single family residential companies in our growing industry,” Schmitz said. “Over the past year, our management and Board have explored many options to enhance returns to our stockholders and we believe this strategic transaction is the best way to deliver long-term value to our stockholders. This merger provides American Residential Properties stockholders with a premium for their shares and the opportunity to benefit from participation in the upside potential of an efficient, larger platform that is well positioned in high growth markets and that will benefit from operating synergies.”
The AH4R and ARPI transaction is the second major merger of single-family rental companies announced in the last three months. In September, Starwood Waypoint Residential and Colony American Homes announced a definitive merger agreement which would combine the two companies in a stock-for-stock transaction. That combined company, which will be managed internationally, is expected to own and manage more than 30,000 single-family homes nationwide and have an asset value of about $7.7 billion when the transaction closes sometime in the first quarter of 2016.