Lennar Corp., the second-largest home builder in the nation, agreed to buy luxury home builder WCI Communities in a deal that would expand Miami-based Lennar’s reach and operations in the state.
Lennar will spend $643 million to acquire Bonita Springs-based WCI, a transaction that combines two of the largest home construction companies in Florida. The boards of both publicly traded companies have approved the deal, which must still get the nod from WCI shareholders.
News of the deal sent WCI shares soaring in morning trading, and its stock closed the day 38 percent higher on Thursday. Lennar shares closed up at less than 1 percent in New York Stock Exchange trading.
Lennar offered $23.50 in cash and stock for each WCI share, or about 37 percent more than WCI’s closing share price on Wednesday. The transaction is based on an enterprise value of $809 million, according to a statement.
“WCI’s land portfolio dovetails perfectly with our own Florida footprint and expands our product offering to capture more of the move-up market,” Lennar CEO Stuart Miller said in a statement. “Our combined presence in the premier coastal Florida markets will drive growth and allow significant cross and dual brand-marketing opportunities.”
In the first nine months of this year, Lennar delivered 18,335 homes and has 20,774 on order, according to its third-quarter earnings statement. WCI delivered 561 in the first half of its fiscal year, and reported that it had 578 homes on order in its most recent statement.
Charles Brecker, a partner in the Miami office of law firm Arnstein & Lehr, said he expects Lennar to be a much more active builder of residential and mixed-use high-rise projects, always the benchmark of WCI’s best practices.
“Historically, Lennar has opted for horizontal developments, so this added niche should perfectly fit its agenda in broadening its development capabilities, similar to it having rolled out a commercial division a few years ago,” said Brecker, who represents residential developers across Florida. “It should prove to be one of its best acquisitions for a company that continues to outperform its competition.”
Still, Brecker said, the deal further accelerates the consolidation trend in which fewer residential developers have survived, with the recent elimination of dozens of builders and developers that either suffered insolvency, closed their businesses, or like WCI, were acquired by a national home builder.
“It is becoming ever more challenging for the remaining mom-and-pop home builders to compete with companies like Lennar, Related, GL Homes, etc.,” he said.
As part of the agreement, WCI can shop around for a better offer for 35 days. If no better offer is found, then WCI shareholders will vote on the proposal in December or January. Lennar said it would expect the deal to be completed shortly thereafter.
Lennar, founded in 1954, builds affordable, move-up and retirement homes. In its most recent quarterly earnings report, released Monday evening, the home builder posted gains in sales, prices and new orders, and its results exceeded analysts’ expectations.
Lennar reported a quarterly profit of $235.8 million, or $1.01 a share, up from $223.3 million, or 96 cents a share, a year prior. Revenue grew 13.7 percent to $2.83 billion.