Lennar is buying fellow home builder CalAtlantic in $5.7-billion deal

Lennar Corp. is buying CalAtlantic Group Inc. in a $5.7-billion deal that would create the nation’s largest home builder as sales of new homes reach levels not seen in a decade.

The deal — which also includes the assumption of $3.6 billion of debt — would create a company with a footprint in 21 states, including California. The companies had a combined $17 billion in revenue over the last 12 months.

Home builders face rising costs for materials, land and labor in the wake of devastating hurricanes that hit Florida, Texas and Puerto Rico this year.

The deal announced Monday is expected to generate annual cost savings of $250 million, with about $75 million in savings expected in fiscal 2018.

“This combination increases our scale in the markets that we already know and in the products we already offer to entry-level, move-up and active adult customers,” Lennar Chief Executive Stuart Miller said in a statement. “As a result, the combined company will have a top 3 ranking in 24 of the top 30 markets in the country.”

D.R. Horton Inc. of Texas is the nation’s largest home builder.

Lennar is based in Miami; CalAtlantic Group is based in Arlington, Va. California is studded with developments by each company.

Lennar also is the largest shareholder of Five Point Holdings, an Aliso Viejo company that is developing the 21,000-home Newhall Ranch in the Santa Clarita Valley, the Great Parks Neighborhoods in Irvine and two projects in San Francisco.

The most recent data from the Commerce Department last week showed that nationwide sales of new homes leaped 18.9% in September to a seasonally adjusted annual rate of 667,000, the highest level since October 2007.

The gains came from every region including the South which saw a nearly 26% boost as people are replacing homes destroyed or damaged in Hurricanes Harvey and Irma.

With unemployment rates extraordinarily low, economists believe housing demand will increase.

Surveys of home builders reflect growing optimism about demand given the housing shortage.

The deal would give CalAtlantic shareholders 0.885 of a share of Lennar stock per CalAtlantic share, with an implied value of $51.34, a 27% premium over CalAtlantic’s Friday closing price.

Current CalAtlantic shareholders would own about 26% of the combined company.

Lennar shares closed down 4% at $55.68. CalAtlantic shares rose 21.3% to $49.65.

UPDATES:

3:45 p.m.: This article was updated with closing stock prices and details on Lennar’s relationship with Five Point Holdings.

This article was originally published at 9:30 a.m.

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