Lennar Corp. and CalAtlantic Group, two of the country’s largest residential builders are merging to form America’s largest home builder in a $9.3 billion deal. The merger will cover around 240,000 building plots or home sites in 21 states, and the combined company will have about $18 billion in market capitalization.
Lennar and CalAtlantic operate in 31 of the same markets nationwide. CalAtlantic, however, will bring new markets such as Salt Lake City and Indianapolis to Lennar’s portfolio. CalAtlantic also has a stronger presence than Lennar in Chicago and California. “What we’re trying to do is become the builder of choice in each of our markets,” says Lennar President Rick Beckwitt. “The blend of the price point brands is powerful.”
The deal is expected to generate about $250 million in annual cost savings to the companies by reducing overhead costs. Rising labor costs and other construction expenses have hindered the homebuilding industry and tamped down new-home construction in recent years. “We can garner efficiencies through a combination of the products we’re familiar with. … We’ll be able to drive costs down and improve margins,” Lennar CEO Stuart Miller told Wall Street analysts Monday.
Lennar has been in acquisition mode lately. In September 2016, the company purchased luxury home builder WCI Communities for $643 million. The Lennar-CalAtlantic deal still must be approved by each company’s shareholders before it’s finalized. The transaction is expected to close in the first quarter of 2018, the firms said.
Source: “Lennar to Merge With Home-Builder CalAtlantic in $6 Billion Deal,” SunSentinel (Oct. 30, 2017) and “Lennar Makes Deal for CalAtlantic as Home Builders Face Challenges,” The New York Times (Oct. 30, 2017)
