D.R. Horton to Acquire Vidler Water, Law Firm Investigates
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D.R. Horton to Acquire Vidler Water, Law Firm Investigates

Homebuilding company D.R. Horton, Inc. (DHI) is merging with Vidler Water Resources (VWTR). Under the merger agreement, DHI will acquire Vidler in an all-cash transaction for $15.75 per share. The acquisition price represents a 39% premium over Vidler’s book value of equity.

Vidler owns premium water rights and other water-related assets in southwestern U.S. markets. The company has expertise in accessing, developing, and deriving value from water assets while also navigating the regulatory landscape.

Deal Terms

Post-closing, Vidler will operate as a separate division within DHI. The transaction, with an approximate equity value of $291 million, is anticipated to close in Q2 of this year.

Under the agreement, DHI will begin a tender offer for all outstanding Vidler shares via its owned acquisition subsidiary.

Deal Under Investigation

In a major development post announcement from DHI, law firm Wohl & Fruchter LLP announced it is investigating if Vidler’s directors approved the transaction in the best interests of the company’s shareholders.

This is because the transaction price of $15.75 is lower than the $16.27 closing price of the stock as of the day before the deal announcement.

Wall Street’s Take

J.P. Morgan analyst Michael Rehaul has reiterated a Buy rating on the stock while decreasing the price target to $82.5 from $100. Amid rising interest rates, the analyst does not see a significant rebound in homebuilding names.

Overall, the Street has a Moderate Buy consensus rating on the stock based on seven Buys and four Holds. The average D.R. Horton price target of $104.39 implies upside potential of about 44%.

Closing Note

As a result of these developments, DHI shares fell 2.15% on Thursday. Vidler’s portfolio will help DHI mitigate its need for water for development in key southwestern U.S. markets. On the other hand, the investigation of the transaction by Wohl & Fruchter has raised key areas of concern for investors in the company.

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