Lennar (NYSE: LEN) said on Monday it would buy smaller rival CalAtlantic (NYSE: CAA) in a stock-and-cash deal valued at about $9.3 billion, including debt, to create the largest homebuilder in the United States.
The implied value of the deal is $51.34 per share, representing a premium of 27% to CalAtlantic's Friday close.
The equity value of the deal, which is expected to close in the first quarter of 2018, is $5.66 billion, based on CalAtlantic's 110.2 million outstanding shares as of July 26.
The $9.3-billion deal includes net debt of $3.6 billion.
The combined entity would have a market cap of about $18 billion, based on current prices, and control 1,300 active communities in 49 markets, Lennar said.
On a pro forma basis, CalAtlantic stockholders are expected to own about 26% of the combined company.
It is currently anticipated that the transaction will generate annual cost savings and synergies of approximately $250 million, with approximately $75 million 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.
Lennar CEO Stuart Miller said, “This combination is first and foremost to enhance shareholder value. The transaction is accretive before deal costs in fiscal year 2018 and significantly accretive in fiscal year 2019.”
Shares in Lennar declined $1.58, or 2.7%, to $56.43, while shares in CalAtlantic skyrocketed $9.18, or 22.7%, to $49.63.
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