The Lennar Corporation said it will merge with CalAtlantic Group to form America’s largest homebuilder in a stock-and-cash deal worth $5.7 billion. The deal would create a behemoth with around 240,000 building plots in 21 states, a market value of about $18 billion and combined revenue of $17 billion over the past 12 months.
The announcement came as labor shortages and destructive weather in the United States are weighing on new construction. Parts of the South were hit hard by Hurricanes Harvey and Irma, with new housing construction in the region falling 9.3 percent last month as housing starts across the country declined 4.7 percent to a one-year low of 1.127 million units. Homebuilders have expressed steady concerns over their collective struggle to find skilled labor, with 60 percent saying they had found it difficult to attract the right workers during the third quarter of the year, according to a survey published last month; another 30 percent said they had moderate difficulty finding such workers. The trend could be exacerbated by the devastating wildfires in California, which are expected to increase the demand for skilled employees to carry out rebuilding. By merging, Lennar and CalAtlantic hope their size will help them achieve “efficiencies in purchasing” and to gain “access to land, labor and overhead allocation,” Stuart Miller, Lennar’s chief executive, said in a news release. The companies hope to generate cost savings of $250 million annually. “This combination increases our scale in the markets that we already know and in the products we already offer,” Mr. Miller added. Under the deal’s terms, CalAtlantic shareholders would receive 0.885 of a Lennar share. That would equate to $51.34 a share, a 27 percent premium above the stock’s closing price on Friday. The transaction values CalAtlantic at $9.3 billion, including debt. CalAtlantic shareholders also have the option to take all or a portion of their shares in cash, at $48.26 a share. The cash payments would be limited to a total of $1.2 billion, Lennar said. On completion of the transaction, CalAtlantic shareholders are expected to own about 26 percent of the combined company. The deal is expected to close in the first quarter of 2018, subject to shareholder approval. “This combination is first and foremost to enhance shareholder value,” Mr. Miller said. “The combined company will have a strong balance sheet and generate significant cash flow available to pay down debt and repurchase shares, which will improve returns on capital and equity.” Mr. Miller and his family trust, which hold a 41.4 percent voting interest in Lennar, and MP CA Homes, an affiliate of MatlinPatterson Global Opportunities Partners that holds a 25.4 percent voting interest in CalAtlantic, have agreed to support the deal, the companies said. Citigroup and the law firm Goodwin Procter advised Lennar; J.P. Morgan and the law firm Gibson, Dunn & Crutcher advised CalAtlantic. Reported by The New York Times (Oct. 30, 2017) For complete information on Lennar and CalAtlantic including all corporate and division offices and leading personnel refer to The National Builders Directory and Online Database.
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