- Business combination creates a high growth, land-light publicly
traded homebuilder
- GSH has a 20+ year operating history and the combined company
will be positioned to benefit from the favorable in-migration and
demographic trends in the southeast United States
- GSH shareholders will convert 100% of their shares into shares
of the combined company alongside $25 million of committed capital
from the DHHC sponsor group, including David Hamamoto and Antara
Capital
Great Southern Homes, Inc. (“GSH” or the “Company”) announced
today that it has entered into a definitive merger agreement with
DiamondHead Holdings Corp. (NASDAQ: DHHC) (“DiamondHead” or
“DHHC”), a special purpose acquisition company. Upon closing of the
transaction, GSH will become a publicly traded company, and
DiamondHead Holdings Corp. will be renamed United Homes Group, Inc.
DiamondHead is expected to remain listed on the Nasdaq Capital
Market and is expected to trade under the new ticker symbol
“UHG.”
GSH is currently one of the largest homebuilders in the
Southeast. The Company builds homes in South Carolina and Georgia,
focusing on the entry level and first time move up home buyer
segments. GSH plans to employ a capital efficient “land-light”
operating model that is expected to generate higher returns with
lower cyclical risk compared to a traditional homebuilding
operating model. Through organic growth, GSH has become the 25th
ranked starter-home builder and the 41st ranked single-family
detached home builder in the United States, respectively, based on
2021 home closings according to Pro Builder’s 2022 Housing Giants
Report.
DiamondHead is a special purpose acquisition company led by
Co-CEO and Chairman David Hamamoto, who has over 40 years of
experience in real estate investing, as well as operating both
private and publicly held real estate businesses. David Hamamoto
was the founder and Chairman of the previously publicly-traded
NorthStar real estate related companies: NorthStar Realty Finance
Corp., NorthStar Asset Management Group, Inc. and NorthStar Realty
Europe Corp. In addition, David Hamamoto was a former partner at
Goldman, Sachs & Co. and the co-founder of its Real Estate
Principal Investment Group and Whitehall funds.
DiamondHead is co-sponsored by Antara Capital, which is an
event-driven hedge fund founded by Himanshu Gulati in 2018 that
invests across a wide variety of financial instruments, including
loans, bonds, convertible bonds, stressed/distressed credit and
special situation equity investments.
Industry / Company Highlights
- Attractive Long-Term Industry Tail Winds: Sustained
underbuilding of single-family homes since 2007. A 2021 FHLMC
(Freddie Mac) study estimated that the U.S. is 4.4 million homes
short of demand (based on household formations).
- Established Track Record: Founded by Michael Nieri and
based in Columbia, South Carolina, GSH is one of the largest
private homebuilders in the Southeast. GSH and its predecessors
have a 20+ year proven track record of strong organic growth,
constructing over 11,000 homes to date with industry leading gross
profit margins and a strong EBITDA profile.
- “Land-Light” Operating Model: GSH plans to employ a
“land-light” operating model. By controlling land supply primarily
through lot option contracts versus carrying lot inventory
on-balance sheet, GSH is expected to generate higher returns on
invested capital with more flexibility, while de-risking the
balance sheet to better operate through industry cycles. Today, GSH
has access to over 11,000 finished lots in high demand
submarkets.
- High Growth Geographic Footprint: GSH’s markets in South
Carolina and Georgia have enjoyed faster growth and in-migration
patterns than national averages historically, and these trends are
expected to continue in the future. According to Zonda, the
population in GSH markets has grown 5% since 2017 whereas the
national figure is up only 2% for the same period, and
single-family starts in GSH markets have outperformed the national
average as builders and developers work to meet housing
demand.
- Affordable Entry-Level Focus: GSH’s core affordable
product expertise aligns with consumer demand. Entry level and
first time move up homes represented approximately 80% of sales
revenue for 2021. Housing starts for these product segments are at
multi-decade lows, resulting in significant supply
constraints.
- Transaction Provides Capital for Future Expansion:
Committed capital from the sponsor group of DHP SPAC-II Sponsor
LLC, David Hamamoto and Antara Capital. Expected proceeds from the
transaction will allow GSH to augment organic growth by executing
on its strategy of opportunistic M&A and the development of a
programmatic institutionally focused build-to-rent platform.
Michael Nieri, Founder and CEO of Great Southern Homes, said,
“For over 20 years I have worked to build GSH into the leading
Southeast homebuilder it is today. I am excited for the next
chapter for GSH, where through the combination of my operational
expertise with David Hamamoto’s public company and capital markets
experience, we plan to grow UHG into a national homebuilder. Our
growth plans include both continued organic expansion as well as
becoming a merger partner of choice for smaller regional
homebuilders located in high growth markets. Additionally, we are
building out a programmatic, institutional build-to-rent platform,
where our current product set and geographic footprint are well
positioned to meet the demands of the strong and growing rental
market for single family homes.”
David Hamamoto, Chairman and co-CEO of DiamondHead Holdings
Corp., commented: “We are thrilled to partner with Michael Nieri
and the GSH team and look forward to executing on our shared
long-term vision. We are impressed with the scale and operational
performance of GSH, and we are excited to work with the GSH team in
continuing their growth as a public homebuilder. We believe there
continues to be a massive undersupply of single family homes in the
U.S., especially in starter and first move up products which will
result in significant demand for the foreseeable future. In
addition, as Michael mentioned, we believe there are extremely
compelling opportunities to generate accretive growth through
M&A as well as a programmatic build-to-rent platform.”
Himanshu Gulati, Founder and CIO of Antara Capital, says, “We
are excited to partner with Michael and David on this opportunity.
We believe GSH is a best in class operator with significant
potential to grow throughout the United States. We look forward to
supporting the company’s growth trajectory and future M&A
plans.”
Transaction Overview
The transaction values the combined company at a pro forma
enterprise value of approximately $572 million, as of December 31,
2022.
As part of the transaction, all of GSH’s existing shareholders
will roll 100% of their shares into shares of the combined company
and, assuming no redemptions from DHHC public shareholders, will
hold approximately 51% of the shares of the combined company on
closing.
Assuming no redemptions from DHHC shareholders, the transaction
will deliver approximately $320 million in cash proceeds, net of
estimated transaction costs, to the combined company including a
$25 million commitment to purchase and not redeem DHHC public
shares from the DHHC sponsor group, including David Hamamoto and
Antara Capital.
The transaction includes an earn-out provision pursuant to which
GSH stockholders are entitled to receive up to an aggregate maximum
of 20 million additional shares, over a five year period, as and
when the share price of the combined company reaches certain
thresholds. In addition, approximately 2.1 million shares owned by
the Sponsor currently will be subject to the earn-out. The
transaction also provides that additional Sponsor shares will
become subject to the earn-out to the extent there is not $100
million of common stock at closing (including shares of common
stock not redeemed, newly issued common stock and common stock
subject to any convertible securities issued by DHHC prior to the
closing).
The Board of Directors of GSH and DHHC have approved the
transaction. The obligation of GSH to complete the transaction is
subject to a minimum cash condition of $125 million. For purposes
of the minimum cash condition, cash includes cash in the
DiamondHead trust account after giving effect to redemptions
(including the $25 million commitment to purchase and not redeem
DHHC public shares from the DHHC sponsor group, including David
Hamamoto and Antara Capital) and any other permitted financings
obtained in connection with the completion of the transaction.
There can be no assurances that the minimum cash condition, which
may be waived by GSH, will be satisfied. The transaction will also
require the consent of GSH’s lenders and the approval of DHHC
stockholders, and is subject to customary closing conditions. The
transaction is expected to close during the first quarter of
2023.
Advisors
BTIG, LLC is acting as exclusive sell-side advisor to GSH.
Nelson Mullins Riley & Scarborough LLP is acting as counsel to
GSH.
Zelman Partners is acting as exclusive M&A advisor to
DiamondHead. Sullivan & Cromwell LLP is acting as counsel to
DHHC.
Investor Presentation
Additional information about the proposed transaction, including
an investor presentation will be available at
www.unitedhomesgroup.com. A copy of the business combination
agreement and the investor presentation, will be provided in a
Current Report on Form 8-K to be filed by DHHC with the Securities
and Exchange Commission (“SEC”) and available at www.sec.gov. In
addition, DHHC intends to file a registration statement on Form S-4
with the SEC, which will include a proxy statement/prospectus, and
will file other documents regarding the proposed transaction with
the SEC.
The company plans to host an Investor Day to discuss the
transaction and business outlook on Monday, Oct. 3rd. Further
details will be forthcoming later in September.
About DHHC
DiamondHead Holdings Corp. is a blank check special purpose
acquisition company formed for the purpose of effecting a merger,
capital stock exchange, asset acquisition, stock purchase,
reorganization or similar business combination with one or more
businesses.
About GSH
Great Southern Homes (GSH) is one of the largest and most
established homebuilders in the Southeast, having built more than
11,000 homes over the last two decades. The Company currently has a
presence in South Carolina and Georgia and focuses on providing
high-quality, affordable homes for the entry-level and first
move-up segments. GSH was the 25th ranked starter-home builder and
the 41st ranked single-family detached home builder in the United
States, respectively, based on 2021 home closings according to Pro
Builder’s 2022 Housing Giants Report.
Important Information and Where to Find It
In connection with the proposed transaction, DHHC intends to
file relevant materials with the SEC, including a Registration
Statement on Form S-4 that will include a proxy statement and
prospectus of DHHC. DHHC’s stockholders and other interested
persons are advised to read all relevant documents filed with the
SEC, including DHHC’s proxy statement and prospectus, when
available, as these materials will contain important information
about DHHC, GSH and the proposed transaction. Investors and
security holders will be able to obtain the documents free of
charge at the SEC’s web site, http://www.sec.gov, and DHHC
stockholders will receive information at an appropriate time on how
to obtain transaction-related documents free of charge from DHHC.
Such documents are not currently available.
Participants in the Solicitation
DHHC and GSH and their respective directors and officers may be
deemed to be participants in the solicitation of proxies from
DHHC’s stockholders in respect of the proposed transaction.
Information about DHHC’s directors and executive officers and their
ownership of DHHC’s securities is set forth in DHHC’s filings with
the SEC, including DHHC’s Annual Report on Form 10-K filed with the
SEC on April 13, 2022. To the extent that holdings of DHHC’s
securities have changed since the amounts printed in DHHC’s Annual
Report on Form 10-K, such changes have been or will be reflected on
Statements of Change in Ownership on Form 4 filed with the SEC.
Additional information regarding the interests of those persons and
other persons who may be deemed participants in the proposed
transaction may be obtained by reading the proxy
statement/prospectus regarding the proposed transaction when it
becomes available. You may obtain free copies of these documents as
described in the preceding paragraph.
Forward-Looking Statements
Certain statements, estimates, targets and projections in this
press release may be considered forward-looking statements within
the meaning of the federal securities laws with respect to the
proposed transaction between DHHC and GSH. Forward looking
statements generally relate to future events or involving, or
future performance of, DHHC or GSH. For example, statements
regarding anticipated growth in the industry in which GSH operates
and anticipated growth in demand for GSH’s products, projections of
GSH’s future financial results and other metrics, the satisfaction
of closing conditions to the proposed transaction between DHHC and
GSH and the timing of the completion of the proposed transaction
are forward-looking statements. In some cases, you can identify
forward-looking statements by terminology such as “pro forma”,
“may”, “should”, “could”, “might”, “plan”, “possible”, “project”,
“strive”, “budget”, “forecast”, “expect”, “intend”, “will”,
“estimate”, “anticipate”, “believe”, “predict”, “potential” or
“continue”, or the negatives of these terms or variations of them
or similar terminology. Such forward-looking statements are subject
to risks, uncertainties, and other factors which could cause actual
results to differ materially from those expressed or implied by
such forward looking statements.
These forward-looking statements are based upon estimates and
assumptions that, while considered reasonable by DHHC and its
management, and GSH and its management, as the case may be, are
inherently uncertain. Factors that may cause actual results to
differ materially from current expectations include, but are not
limited to: (i) the risk that the proposed transaction may not be
completed in a timely manner or at all, which may adversely affect
the price of DHHC’s securities; (ii) the risk that the proposed
transaction may not be completed by DHHC’s business combination
deadline and the potential failure to obtain an extension of the
business combination deadline if sought by DHHC; (iii) the lack of
a third party valuation in determining whether or not to pursue the
proposed transaction; (iv) the amount of the costs, fees, expenses
and other charges related to the proposed transaction; (v) the
outcome of any legal proceedings that may be instituted against
DHHC, GSH, the combined company or others following the
announcement of the business combination agreement relating to the
proposed transaction, the ancillary agreements contemplated thereby
and the transactions contemplated thereby; (vi) the inability to
complete the proposed transaction due to the failure to obtain
approval of the stockholders of DHHC or GSH or DHHC’s failure to
satisfy other conditions to closing; (vii) changes to the proposed
structure of the proposed transaction that may be required or
appropriate as a result of applicable laws or regulations; (viii)
the ability to meet stock exchange listing standards following the
consummation of the proposed transaction; (ix) the risk that the
proposed transaction disrupts current plans and operations of GSH
or diverts management’s attention from GSH’s ongoing business; (x)
the ability to recognize the anticipated benefits of the proposed
transaction, which may be affected by, among other things,
competition, the ability of the combined company to grow and manage
growth profitably, and maintain relationships with customers and
suppliers; (xi) costs related to the proposed transaction; (xii)
changes in applicable laws or regulations; (xiii) the possibility
that GSH or the combined company may be adversely affected by other
economic, business, regulatory, and/or competitive factors such as
rising interest rates or an economic downturn; (xiv) GSH’s
estimates of expenses and profitability; (xv) the evolution of the
markets in which GSH competes; (xvi) the ability of GSH to
implement its strategic initiatives; and (xvii) other risks and
uncertainties set forth in the section entitled “Risk Factors” and
“Cautionary Note Regarding Forward-Looking Statements” in DHHC’s
Annual Report on Form 10-K for the year ended December 31, 2021 and
other risks and uncertainties indicated from the time to time in
the definitive proxy statement to be delivered to DHHC’s
stockholders and related Registration Statement on Form S-4,
including those set forth under “Risk Factors” therein, and other
documents filed to be filed with the SEC by DHHC. These filings
identify and address other important risks and uncertainties that
could cause actual events and results to differ materially from
those contained in the forward-looking statements.
Readers are cautioned not to put undue reliance on
forward-looking statements, and DHHC and GSH assume no obligation
and do not intend to update or revise these forward-looking
statements, whether as a result of new information, future events,
or otherwise. Neither DHHC nor GSH gives any assurance that either
DHHC or GSH will achieve its expectations. The inclusion of any
statement in this communication does not constitute an admission by
DHHC or GSH or any other person that the events or circumstances
described in such statement are material.
Non-Solicitation
This press release does not constitute (i) a solicitation of a
proxy, consent or authorization with respect to any securities or
in respect of the proposed transaction or (ii) an offer to sell, a
solicitation of an offer to buy, or a recommendation to purchase
any security of DHHC, GSH, or any of their respective affiliates.
No such offering or securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the Securities
Act of 1933, as amended. This press release may be deemed to be
solicitation material in respect of the proposed transactions
contemplated by the Business Combination Agreement between GSH and
DHHC.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220910005025/en/
Investor Relations Contact: Drew Mackintosh Mackintosh
Investor Relations, LLC drew@mackintoshir.com (310) 924-9036
Media Contact: Allen Hutto United Homes Group
allenhutto@greatsouthernhomes.com (803) 665-2764
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