Lennar Corporation and CalAtlantic Group boards of directors have unanimously approved a definitive merger agreement.
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Each share of CalAtlantic stock will be exchanged for 0.885 shares of Lennar Class A common stock in a transaction valued at approximately $9.3 billion, including $3.6 billion of net debt assumed.
The business combination will create the nation's largest homebuilder with the last twelve months of revenues in excess of $17 billion and equity market capitalization, based on current market prices, of approximately $18 billion.
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 $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.
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, 2017, 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 $1.2 billion.
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. ■