Firm buys Schuler in $1.2 billion deal
Advertiser Staff and News Services
Schuler Homes Inc.'s acquisition by a Texas-based homebuilder will create the second-largest homebuilder in the nation, but it doesn't mean the combined corporation will lessen its presence in Hawai'i.
The cash, stock and debt deal valued at $1.2 billion by Texas-based D.R. Horton, the nation's fourth-largest homebuilder, means Schuler will cease to be a Hawai'i-based company, but the company's co-founder said yesterday that growth is expected to continue in the islands.
Schuler Homes sold 300 to 350 homes in the state over the past 12 months, and expects that Hawai'i sales will increase "a little bit" in the next year, company president Jim Schuler told analysts yesterday following the announcement.
The purchase will turn Schuler Homes into a division of D.R. Horton. Jim Schuler will become a director and senior vice president of D.R. Horton, and president of its "Schuler Homes Region" consisting of California, Hawai'i, Washington, Oregon and Arizona.
"Schuler Homes remains intact and will operate relatively independently," Schuler said. "Schuler Homes remains Schuler Homes in Hawai'i. My home is there. That's where my heart is."
Combined with Schuler, the companies said they would have had revenue of more than $6 billion in the 12 months ended in September. The deal, which needs approval by both companies' shareholders, is expected to close in the next three months.
Although the combined companies expect to save $30 million to $40 million on costs next year by consolidating, there are no plans to move Schuler offices to the Mainland, a D.R. Horton representative said.
No layoffs are planned for either company, according to Donald Horton, D.R. Horton's board chairman. "Both companies have profitable divisions and we're continuing to grow these divisions," he said in a conference call yesterday.
Schuler Homes, through D.R. Horton, also may start to offer mortgage financing and title services to Hawai'i home buyers, said Stacey Dwyer, executive vice president at D.R. Horton.
Hawai'i, however, will become a smaller piece of the combined company, which will be ranked first in market share in nine markets, and ranked in the top five in an additional 20 markets, including Hawai'i.
The acquisition comes as large home builders have been merging to cut costs, raise capital more cheaply and gain advantages in negotiating the purchase of supplies. In the past 20 months, Pulte Homes has bought Del Webb Corp. and Lennar Corp. acquired U.S. Home Corp.
D.R. Horton bought closely held Houston-based Emerald Builders this year, and its previous largest acquisition was the $670 million purchase of Continental Homes Holding Corp. in 1998.
Earlier this year, a merger between Schuler Homes and California-based Western Pacific Housing was completed, pushing Schuler to among the top 15 builders in the country.
Founded in 1978, D.R. Horton Inc. operates in 20 states and 38 markets, with a presence in the Midwest, Mid-Atlantic, Southeast, Southwest and Western regions of the United States.
The company also provides mortgage financing and title services for home buyers through its subsidiaries CH Mortgage, DRH Title Company, Principal Title, Travis Title Company, Metro Title Company, Century Title Company and Custom Title Company.
Under the deal, D.R. Horton will pay $653 million in cash and stock and assume $552 million in debt of Schuler. The exact value of the stock offer will be based on a 15-day average of D.R. Horton's closing stock price three days before Schuler Homes' stockholder meeting. If the average price is equal to D.R. Horton's closing price of $21.10 Monday, the transaction would have a value of $653 million in cash and stock.
At this price, D.R. Horton would pay $4.09 in cash and 0.570 D.R. Horton shares for each outstanding share of Schuler, valuing the company at $16.12 a share, a 34 percent premium based on Monday's closing price of $12.
Shares of D.H. Horton ended down 71 cents at $20.39 on the New York Stock Exchange and shares of Schuler climbed $3.25, or 27 percent, to close at $15.25 on the Nasdaq Stock Exchange.
Associated Press and Bloomberg News Service reports were included in this story.
