ConDig (08-Jun-17).  Residential developer Forestar Group said that an unsolicited bid for a majority stake in the Austin, Texas-based company tabled by homebuilder D.R. Horton could lead to a deal that is superior to its current merger agreement with Starwood Capital Group.

Forestar said that despite being subject to a previous merger agreement with Starwood, it can take certain actions to further consider D.R. Horton’s bid, including participating in discussions or negotiations.

But it added that there is no assurance Forestar’s board of directors will ultimately rule that D.R. Horton’s bid is a superior proposal.

Forestar agreed to be purchased by Starwood for $14.25 a share in April, but Fort Worth, Texas-based homebuilder D.R. Horton this week launched a $520 million, or $16.25 a share, bid for a 75% stake in residential developer.

It has been reported that Forestar will have to pay Starwood $20 million if it backs out of the deal.

Forestar predominately develops lots and sells them to homebuilders and owns interests in 50 residential and mixed-use projects comprising 4,600 acres of real estate.

The bid by D.R. Horton comes as US homebuilders attempt to expand their land holding in the wake of rising land prices and increased costs due to a lack of skilled labor.

D.R. Horton posted net income of $229.2 million for the quarter ended March 31 2017 compared to $195.1 million in the same period last year and was also up on profit of $206.9 million in its fiscal first quarter.

Revenue for the second quarter rose 17% to $3.2 billion from $2.7 billion in the same quarter of fiscal 2016 and was also up on revenue of $2.8 billion in the prior quarter.