Shares of Forestar Group (FOR), a residential and mixed-use real estate development company, jumped in morning trading after homebuilder D.R. Horton (DHI) offered to buy 75% of the company for $16.25 per share in cash. The price is above the existing deal between Forestar and Starwood Capital.

D.R. HORTON BID: D.R. Horton announced this morning that it offered to buy 75% of real estate development company Forestar Group for approximately $520M. The all-cash offer of $16.25 per share represents a 14% premium over the price offered by Starwood Capital to buy all of Forestar. Under the terms of D.R. Horton's offer, Forestar would remain a public company "to ensure continued access to capital to support the increasing scale of the business." D.R. Horton said it has the cash and other immediately available capital to fund the deal.

STARWOOD DEAL: In April, Forestar agreed to be bought by affiliates of Starwood Capital for $14.25 per share in cash, or about $605M. "After conducting a thorough review assisted by highly experienced financial and legal advisors, the board believes that engaging in the transaction with Starwood is the best option to maximize stockholder value," Forestar said at the time.

WHAT'S NOTABLE: In a conference call discussing the proposed deal, D.R. Horton said it "evaluated and pursued" a potential transaction with Forestar last year, but noted that the companies were unable to reach acceptable terms. Since then, D.R. Horton said that Forestar's team has made "significant progress" disposing of noncore assets and on focusing its business, adding that " we feel it is important to express our interest publicly now to give the Forestar board and its shareholders time to review our proposal. We believe our proposal is clearly superior." D.R. Horton said it sent a letter to Forestar's board this morning and encouraged them to "move promptly." D.R. Horton President and CEO David Ault noted that the company has not held discussions with Forestar at this time.

PRICE ACTION: Forestar is up 12% to $15.90 in morning trading, while D.R. Horton is down nearly 1% to $33.50 per share.