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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 28, 2000
Hovnanian Enterprises, Inc.
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(Exact Name of registrant specified in its charter)
Delaware 1-8551 22-1851059
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(State or other Jurisdiction (Commission File Number) (I.R.S. Employer
Of Incorporation) Identification No.)
10 Highway 35, P.O. Box 500
Red Bank, New Jersey 07701
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(Address of principal executive offices)
Registrant's telephone number: (732) 747-7800
Item 5. Other Events.
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On August 28, 2000, Hovnanian Enterprises, Inc. (the "Registrant")
announced that it and Washington Homes, Inc. have entered into an Agreement
and Plan of Merger providing, subject to the terms and conditions set forth
therein, for the merger of Washington Homes, Inc. with and into a wholly
owned subsidiary of the Registrant. A copy of the press release is attached
as an exhibit hereto and incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
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(c) Exhibits
99.1 Press Release dated August 28, 2000
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HOVNANIAN ENTERPRISES, INC.
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(Registrant)
By: /s/ Peter S. Reinhart
--------------------------
Peter S. Reinhart
Senior Vice President
General Counsel
Date: August 28, 2000
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INDEX TO EXHIBITS
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Exhibit Number Exhibit
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99.1 Press Release dated August 28, 2000
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Exhibit 99.1
HOVNANIAN ENTERPRISES, INC. News Release
Contact: At the Company At The Financial Relations Board
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Kevin C. Hake Kerry Thalheim
Vice President, Finance 675 Third Avenue
and Treasurer 212-661-8030
732-747-7800
HOVNANIAN ENTERPRISES AND WASHINGTON HOMES ANNOUNCE MERGER
RED BANK, NJ, August 28, 2000 -- Hovnanian Enterprises, Inc. (ASE: HOV) and
Washington Homes, Inc. (NYSE: WHI) announced today that they have signed a
definitive merger agreement. Hovnanian Enterprises, founded in 1959 and
headquartered in Red Bank, New Jersey, and Washington Homes, headquartered in
Landover, Maryland, are each leading national homebuilders. The combination
of the two Companies is expected to rank among the top-ten homebuilders in
the United States.
Under the terms of the agreement, Washington Homes shareholders will receive
the equivalent of 1.39 Hovnanian class A common shares or $10.08 in cash for
each share of Washington Homes, subject to certain adjustments, for a total
purchase price of approximately $77.4 million, based on Hovnanian's closing
share price of $7-1/16 on Friday, August 25, 2000. Up to 50% of the
consideration will be paid in cash, with the balance, not to exceed 60%, paid
in Hovnanian common shares. The transaction is expected to close following
regulatory and shareholder approvals and customary closing conditions.
Hovnanian expects the transaction to be accretive to earnings per share in
fiscal year 2001.
In its fiscal year ended July 31, 2000, Washington Homes delivered 2,517
homes and recorded approximately $470 million in revenue. Hovnanian projects
record deliveries of approximately 4,400 homes and revenue approaching $1.2
billion in its fiscal year ending October 31, 2000. As of July 31, 2000, the
combined Companies have a backlog reaching 3,332 homes valued at $800 million
and expect to deliver about 8,000 homes in fiscal 2001.
Subsequent to the merger, Hovnanian will maintain its current position as the
largest builder in New Jersey and will become the second-largest builder in
Metro-Washington, DC and the largest builder in North Carolina. In addition,
Hovnanian will continue to have a significant presence in Dallas, Texas and
Southern California and will be a top-five builder in Nashville, Tennessee,
and the market leader in Huntsville, Alabama and the Gulf Coast of
Mississippi.
"Our two Companies are an exceptional cultural and strategic fit," says Ara
K. Hovnanian, President and CEO of Hovnanian. "Washington Homes has a similar
focus on quality and profitability and operates in complementary markets,
which will enhance our market concentration strategy. Together, we will
become a more diverse and substantial Company, with shareholders' equity
exceeding $300 million and total assets approaching $ 1.0 billion. Our
increased size and focused market concentration will provide powers and
economies of scale that should lead to superior returns for our shareholders.
Additionally, the combined Company will give our associates a wider stage and
a more advantageous environment in which to flourish. We are delighted to
welcome aboard the strong leadership team and the entire family of Washington
Homes associates who achieved a record performance in their just-ended fiscal
year."
"Our management team is very excited to join forces with Hovnanian," says
Geaton A. DeCesaris, Jr., Chairman, President and CEO of Washington Homes.
"Our two Companies have similar histories of conservative growth and
operating excellence, with a shared emphasis on hiring and cultivating the
best people in the industry," he adds. Mr. DeCesaris will become President of
Homebuilding Operations and Chief Operating Officer for Hovnanian and will
also become a member of the combined Company's Board of Directors. Thomas J.
Pellerito, currently President of Homebuilding and Chief Operating Officer of
Washington Homes, will become President of Hovnanian's Southeast Region,
which will consist of the Company's markets in Maryland, Virginia, North
Carolina, Tennessee, Alabama and Mississippi. "This will allow us to shift
Robert Karen, our current Southeast Region President, to a new executive role
with our growing active adult community group, an area where he has great
expertise," says Mr. Hovnanian. Christopher Spendley, Senior Vice President
and Chief Financial Officer of Washington Homes, will become the Chief
Financial Officer of Hovnanian's Southeast Region.
Mr. DeCesaris adds, "The merger with Hovnanian accomplishes all of our
objectives, which include providing additional liquidity to our shareholders,
more opportunity and better training programs for our associates, and better
access to the capital markets, as well as maximizing efficiencies within our
current operations." The two Companies build a similar, wide array of home
types, ranging from town-homes to larger, single-family homes aimed at move-up
buyers, to active-adult communities. Hovnanian anticipates adopting the
highest-quality designs and best construction practices from the two
Companies in the markets where both Companies currently operate. Both of the
Companies offer full-service mortgage and title services and it is
anticipated that the increased volumes of the combined Company will enhance
the operational efficiencies and profitability of these operations.
"Our unsecured revolving line of credit is sufficient to accomplish this
acquisition and to continue a combined course of strong revenue and profit
growth into 2001 and beyond," says Mr. Hovnanian. "However, we will
eventually seek additional financing to maintain our traditional levels of
capital availability. Washington Homes' strong balance sheet and favorable
land position allow us to complete this acquisition with minimal effects on
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our leverage. Hovnanian remains committed to our stated objective of
achieving a one-to-one ratio of debt to equity by fiscal 2003." Washington
Homes controls more than 11,700 lots in attractive locations which will meet
the Company's growth targets for the next three to five years; approximately
75% of these lots are controlled under rolling option contracts.
Under the terms of the transaction, Washington Homes shareholders can elect
to receive cash or Hovnanian stock, subject to pro-ration such that not more
than 50% of the total consideration is cash and not more than 60% of the
total consideration is stock. The amount of stock to be paid is based on a
ratio of 1.39 Hovnanian shares for each Washington Homes share, and the stock
consideration is subject to a collar arrangement that may limit the increase
or decrease in the value of the stock consideration to 20%.
Hovnanian will pay off or assume Washington Homes' debt, which will be
refinanced under Hovnanian's $375 million unsecured revolving credit
facility. Washington Homes was advised in this transaction by Wasserstein
Perella and Company, Inc.
The merger has been unanimously approved by the Boards of Directors of both
companies and is expected to qualify as a tax-free reorganization to the
Washington Homes shareholders. Shareholders of Hovnanian representing more
than the required majority of the voting power of the Company have agreed to
vote in favor of the transaction. Shareholders of Washington Homes
representing a majority of the outstanding shares of Washington Homes have
also agreed, subject to certain conditions, to vote in favor of the
transaction, which will require the approval of two-thirds of the outstanding
shares. Washington Homes has granted Hovnanian a break-up fee if the
transaction is terminated for certain reasons.
The combination of the two Companies will solidify Hovnanian's position among
the largest homebuilders in the U.S. On an equally important level, Mr.
Hovnanian notes that "it will allow us to continue to apply our standardized
processes and operating strategies across a wider universe, in order to
further enhance our returns." The Company's pioneering enterprise-wide
backbone system, being developed together with SAP AG (NYSE ADR: SAP), is
designed for the volumes anticipated for the combined Company, according to
Mr. Hovnanian, and "should help us to significantly improve our profit over
the coming years. We are undertaking this acquisition at a time when we
believe the equity of both of our Companies is undervalued by the
marketplace; we see our combination as a way to increase our corporate reach
and to move toward our vision of building better. "
In connection with their proposed merger, Hovnanian will file a Registration
Statement with the Securities and Exchange Commission and a Proxy
Statement/Prospectus directed to shareholders of Washington Homes will be
included in that Registration Statement. Other materials relating to the
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Merger also will be filed with the Commission. Investors are urged to read
the Proxy Statement/Prospectus, Registration Statement and other relevant
documents to be filed with the Commission, because they will contain
important information. Materials filed with the Commission will be available
electronically, without charge, at an Internet site maintained by the
Commission. The address of that site is http://www.sec.gov.
Hovnanian Enterprises, Inc. designs, constructs and markets single-family
homes, townhomes and condominiums in planned residential communities in New
Jersey, North Carolina, Pennsylvania, Virginia, Maryland, New York,
California, Texas and Florida in the United States, and in Poland.
Washington Homes, Inc. designs, builds and markets single-family detached
homes and townhomes. It is a leading provider of moderately priced, quality
homes in Maryland, Virginia and Pennsylvania, and under the Westminster Homes
name in Alabama, Mississippi, North Carolina and Tennessee.
Note: All statements in this Press Release that are not historical facts
should be considered as "forward-looking statements" within the
meaning of the Private Securities Litigation Act of 1995. Such
statements involve known and unknown risks, uncertainties and other
factors that may cause actual results to differ materially. Such
risks, uncertainties and other factors include, but are not limited
to, changes in general economic conditions, fluctuations in interest
rates, increases in raw materials and labor costs, levels of
competition and other factors described in detail in the Company's
Form 10-K for the year ended October 31, 1999.
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