Lennar to Buy CalAtlantic, Forming Largest Home Builder in Twin Cities
Lennar Corp. said Monday it had reached an agreement to buy CalAtlantic Group Inc. for $5.7 billion. The combined company would far and away become the largest home builder in the Twin Cities, as well as the nation, by revenue after the deal closes.
For the last 11 years, Miami-based Lenner has been more active than any other home builder in the Minneapolis-St. Paul area, according to the Builders Association of the Twin Cities. Just last year, Lennar reported over $262 million in gross revenue for its homes built in the metro area. Right behind it in the rankings was Arlington County, Virginia-based CalAtlantic with $192 million in gross revenue in the Twin Cities last year.
Both companies constructed over 500 homes a piece for Minnesotans in 2016.
The next largest home builder in the area was Pulte Homes of Minnesota with about $177 million in gross revenue and just over 370 homes built.
If shareholders approve the deal, set to close in early 2018, it would be the “largest merger of home builders since the financial crisis,” according to the Wall Street Journal.
The companies combined have reported upwards of $17 billion in revenue in the last 12 months and have a market capitalization of about $18 billion.
Lenner expects the merger will generate annual cost savings of approximately $250 million, largely by reducing overhead costs and eliminating duplicate public company expenses.
“This combination increases our scale in the markets that we already know,” said Stuart Miller, chief executive officer of Lennar, in a statement. “As a result, the combined company will have a top three ranking in 24 of the top 30 markets in the country,” including the Twin Cities.
Better access to land and labor were chief among the advantages Miller said Lenner would gain from the merger. “The combined land portfolio will position the company for strong profitability for years to come, as we continue to benefit from a solid homebuilding market, supported by job and wage growth, consumer confidence, low levels of inventory, and a production deficit,” he added.
Recently, in the Twin Cities, low inventory has been one of the leading deterrents for shoppers looking to make their first home purchase. “It’s really the bottom-end of the market that’s feeling the most inventory and therefore sales pressure,” said Kath Hamerseng, president-elect of the Minneapolis Area Association of Realtors, earlier in the month.
In Lennar’s release, company president Rick Beckwitt said discussions to merge with CalAtlantic lasted several months. Assuming the deal is finalized, Beckwitt said, “We look forward to executing our strategy as a larger and even stronger company and welcoming a very talented group of CalAtlantic associates to the Lennar family.”