CalAtlantic shares surged in premarket trading, up 8.78% indicated to open at $44, extending a 1.13% gain Friday to close at $40.45.
Lennar said the boards of both companies had approved a definitive merger agreement where each CalAtlantic share would be exchanged for 0.885 shares of Lennar Class A common share, valuing the company at approximately $9.3 billion, including $3.6 billion of net debt assumed.
Lennar shares closed at $58.01 on Friday, giving each CalAltlantic share a value of $51.34 which represents a 27% premium to its closing price on Oct. 27. 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.
The combination will create the U.S.'s largest homebuilder with revenues of more than $17 billion in the past 12 months and a market capitalization of about $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 expected that the deal will generate $250 million of cost savings and synergies, with $75 million expected in the 2018 fiscal year. These synergies are expected to be achieved through direct cost savings, reduced overhead costs and the elimination of duplicate public company expenses.
"This combination is first and foremost to enhance shareholder value. The transaction is accretive before deal costs in fiscal year 2018 and significantly accretive in fiscal year 2019," Lennar CEO Stuart Miller said in a statement. "The combined company will have a strong balance sheet and generate significant cash flow available to pay down debt and repurchase shares, which will improve returns on capital and equity."
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