Dream Finders Homes Buys Assets of MHI for $471M

Homebuilding company Dream Finders Homes, Inc. (DFH) announced that it has completed the acquisition of homebuilding, mortgage banking and title insurance assets of Texas-based homebuilder McGuyer Homebuilders, Inc. (MHI) for $471 million in cash. The purchase and sale agreement was inked in September.

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The acquisition is expected to enhance DFH’s geographic operations in the Austin metro area, along with aiding expansion into Texas markets of Houston, Dallas and San Antonio. The acquired assets include 1,850 home sites, a backlog of 1,845 homes valued over $1 billion and 5,500 lots under control. Now, DFH will own or control over 40,000 lots.

As per the terms of the deal, MHI’s CEO and all its employees will work in the combined entity and operate the existing and new home communities under the Coventry Homes brand.

To meet the payment obligations, DFH used cash in hand of $20 million and issued 150,000 shares of newly-designated Series A Convertible Preferred Stock with an initial liquidation preference of $1,000 per share and a par value of $0.01 per share for a total value of $150 million.

“In addition, DFH increased the aggregate commitments under its senior unsecured revolving credit facility to $818 million, and simultaneously with the closing of the acquisition paid off MHI’s vertical lines of credit facilities for approximately $300 million,” the company said in a release.

Dream Finders Homes CEO Patrick Zalupski said, “MHI has been consistently recognized as one of the nation’s top homebuilders and the company has earned an impeccable reputation over the past 30 years. We believe we can provide capital and efficiencies to help the current team grow well beyond its 2,000 homes produced annually.”

“We also believe we structured the deal in a highly accretive way for DFH shareholders, allowing us to maintain our asset-light business model and generate industry-leading returns on shareholder capital,” Zalupski added. (See Dream Finders Homes stock charts on TipRanks)

Following the second-quarter 2021 earnings results in August, Wedbush analyst Jay McCanless decreased the price target on Dream Finders Homes to $19 (12% upside potential) from $21 while maintaining a Hold rating.

Overall, the stock has a Hold consensus rating based on 2 Holds. The average Dream Finders Homes price target of $20.50 implies 20.9% upside potential from current levels. Shares have decreased 19% over the past year.

Dream Finders Homes scores a 4 out of 10 from TipRanks’ Smart Score rating system, indicating that the stock is likely to perform in line with market averages.