Lennar becomes nation’s largest homebuilder with acquisition of CalAtlantic

Lennar Corp. has reclaimed its spot as the nation’s largest homebuilder after completing the acquisition of CalAtlantic Group. Miami-based Lennar (NYSE: LEN) and Virginia-based CalAtlantic (NYSE: CAA) both received shareholder approval for the merger on Monday. The companies said the deal will be effective at 11:59 p.m. Over 99 percent of shareholders at each company approved the deal. The deal is valued at $9.3 billion, including $3.6 billion in debt. Each share of CalAtantic may be exchanged for either 0.885 shares of Lennar or $48.26 in cash. Lennar said it would pay $1.16 billion in cash and issue 82.7 million shares of Class A common stock and 1.65 million shares of Class B common stock. CalAtlantic Executive Chairman Scott Stowell joined Lennar’s board and CalAtlantic CFO Jeff McCall was named Lennar’s senior VP of corporate services. "We are extremely pleased to announce the completion of this strategic combination with CalAtlantic, creating the nation's leading homebuilder,” Lennar CEO Stuart Miller said. “This combination benefits from overall economic strength, driven by low unemployment, rising wages, favorable tax reform, higher consumer confidence and strong housing demand. In this context, the normalization of interest rates should be offset by these favorable economic conditions."  The deal gives Lennar control of 250,000 homesites in 49 markets across 21 states, increasing its potential to generate revenue amid steady demand for housing across the nation. It will be a Top 3 homebuilder in 24 of the Top 30 largest metro markets in the U.S. Lennar is one of the largest Fortune 500 companies based in South Florida and is the region's No. 1 homebuilder, with 2,183 housing starts across Broward, Miami-Dade and Palm Beach counties in the four quarters ended June 30. CalAtlantic ranked fourth, with 444 home deliveries. Lennar Tampa is No. 1 on the 's Largest Homebuilders List, with 2,580 local closings in 2016. "As we articulated previously, the preparation for the integration process has been well underway and our integration team has made tremendous progress on the roadmap to begin achieving direct cost savings, production efficiencies, technology improvement, consistent underwriting of land acquisitions and overhead reduction,” Miller said. In recent investor presentations, Lennar officials highlighted how cost synergies, such as combined marketing and sales efforts, would make the company more efficient, and how controlling a larger portion of the homebuilding market would allow it to negotiate for more favorable contracts with suppliers. The synergies and cost savings were estimated at $75 million in fiscal 2018, and then $250 million in fiscal 2019. It’s expected that the combined company would have over 43,000 annual homes delivered, for a 7 percent national market share. There are still some headwinds for homebuilders, though. While the federal tax cuts have boosted net income for most people, they removed some of the tax advantages for owning a home versus renting. Many economists expect interest rates to rise considerably, which would make mortgages more expensive. In the fiscal year ended Nov. 30, Lennar posted revenue of $12.6 billion and delivered 29,394 homes. CalAtlantic hasn’t yet reported its revenue for the year ended Dec. 31, but said it delivered 14,602 homes. Both companies have an in-house mortgage division. Lennar also develops apartments. Largest Homebuilders in Tampa Bay Ranked by 2016 local closings Business name 2016 local closings Lennar Tampa 2,580 D.R. Horton Inc. 1,550 CalAtlantic Homes View This List