Dominion Homes enters merger agreement to go private, amends facility to up capacity

By Jennifer Chiou

New York, Jan. 18 - Dominion Homes, Inc. said it entered into a definitive merger agreement to be acquired by a buyout group consisting of companies affiliated with Angelo Gordon & Co., LP and Silver Point Capital, LP as well as the company's largest shareholder, BRC Properties, Inc.

Under the terms of the agreement, Dominion's shareholders, other than the buyout group, will receive $0.65 in cash for each share, which represents a 38% premium over the closing stock price on Jan. 17.

Dominion also said that it entered into amendments to its credit facility in anticipation of the merger, under which lenders have agreed to increase the borrowing capacity by about $3.5 million and to forbear until the earlier of June 30 or termination of the merger agreement from exercising their rights and remedies under the facility.

A special committee of independent directors and the full board of directors have approved the merger agreement and have recommended that shareholders adopt the agreement.

Douglas G. Borror, a principal of BRC Properties, will remain Dominion's chairman of the board of directors and chief executive officer.

"The homebuilding industry continues to be in a very difficult period," Borror said in a news release.

"This transaction will allow Dominion Homes to continue our 55-year tradition of building quality homes that exceed our customers' expectations."

The merger transaction is expected to close in the first half of 2008 and is subject to receipt of shareholder approval and satisfaction of customary closing conditions.

On Nov. 30, the company said that it and its lenders began discussing a possible recapitalization or debt reduction transaction in light of its financial condition and the condition of the home building industry, according to a schedule 13D filed with the Securities and Exchange Commission.

The filing previously said the debt reduction transaction could include a debt-for-equity swap or the company going private.

According to the filing, several events of default have occurred since June on Dominion Homes' credit agreement, which includes a $90 million senior secured second-lien term B loan with detachable warrants exercisable for 1.54 million shares.

Dominion is a Dublin, Ohio-based provider of single-family homes.

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