Lennar, CalAtlantic to merge in deal valued at about $9.3B
Lennar (LEN) and CalAtlantic (CAA) announced that their respective boards of directors have unanimously approved a definitive merger agreement pursuant to which each share of CalAtlantic stock will be exchanged for 0.885 shares of Lennar Class A common stock in a transaction valued at approximately $9.3B, including $3.6B of net debt assumed.
The business combination will create the nation’s largest homebuilder with the last twelve months of revenues in excess of $17B and equity market capitalization, based on current market prices, of approximately $18B.
The combined company will control approximately 240,000 homesites and will have approximately 1,300 active communities in 49 markets across 21 states, where approximately 50% of the U.S. population currently lives.
It is currently anticipated that the transaction will generate annual cost savings and synergies of approximately $250M, with approximately $75M achieved in fiscal year 2018.
These synergies are expected to be achieved through direct cost savings, reduced overhead costs and the elimination of duplicate public company expenses.
Additional savings are also expected through production efficiencies, technology initiatives, and the roll out of Lennar’s digital marketing and dynamic pricing programs. Under the terms of the merger agreement, each share of CalAtlantic stock will be converted into the right to receive 0.885 shares of Lennar Class A common stock. Based on the closing price of Lennar’s Class A common stock on the NYSE on October 27, the implied value of the stock consideration is $51.34 per share, representing a 27% premium to CalAtlantic’s closing price that same day.
CalAtlantic’s stockholders will also have the option to elect to exchange all or a portion of their shares for cash in the amount of $48.26 per share, subject to a maximum cash amount of approximately $1.2B.
CalAtlantic stockholders will receive Lennar stock unless they exercise an option to receive cash. On a pro forma basis, CalAtlantic stockholders are expected to own approximately 26% of the combined company.
The transaction is expected to close in the first calendar quarter of 2018. The transaction is subject to approval by Lennar and CalAtlantic stockholders. Stuart Miller and the Miller Family Trusts have agreed to vote their 41.4% voting interest in Lennar in favor of the merger. MP CA Homes LLC, an affiliate of MatlinPatterson Global Opportunities Partners III L.P., has agreed to vote its 25.4% voting interest in CalAtlantic in favor of the merger.
Additionally, MP CA Homes has agreed to exercise the cash election for at least the number of shares to cause the maximum cash consideration amount to be fully subscribed by electing stockholders.
Upon completion of the transaction, Stowell, CalAtlantic’s Executive Chairman, will join the Lennar board.
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