Lennar to acquire CalAtlantic to become U.S.'s largest home builder

Two of America’s largest home building firms will merge to become the biggest housing developer in the country.

Lennar Corp. said on Monday it’s planning to acquire rival home builder CalAtlantic Group in a $9.3 billion deal that will see the two companies eventually combine their operations. The merger encompasses around 240,000 building plots and home sites across 21 U.S. states, and will see the combined firm have around $18 billion in market capitalization.

Lennar and CalAtlantic both operate in 31 of the same U.S. markets. However, CalAtlantic will add new markets to Lennar’s portfolio including Indianapolis and Salt Lake City. In addition, CalAtlantic also has a much stronger presence in Chicago and California than Lennar does.

“What we’re trying to do is become the builder of choice in each of our markets,” said Lennar President Rick Beckwitt. “The blend of the price point brands is powerful.”

Lennar said the deal will generate around $250 million in annual costs savings for both companies, as it will help to reduce overheads. The home building industry has been hampered somewhat in recent years by the rising cost of labor and some construction materials. As a result, new home production has leveled off in the past few 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,”  CEO Stuart Miller told Wall Street analysts, the New York Times reported.

The Lennar-CalAtlantic deal is subject to approval by the shareholders of both companies before it can be finalized. However this approval is likely to be a formality, meaning that the deal should conclude during the first quarter of 2018, Lennar said.