It will take more than merger news to keep this stock down.
Although Lennar is taking on $3.6 billion in debt, management expects the deal to be accretive in 2018, so the selloff is sort of surprising, TheStreet's Jim Cramer said on CNBC's "Mad Dash" segment. That said, it's a stock-for-stock deal, so there is a lot of adjusting and evaluations still going on by investors.
In the deal, each share of CalAtlantic will be exchanged for .0885 shares of Lennar. Shares of CalAtlantic are up 22% on the merger news, which will make the new entity the largest homebuilder in the U.S. 26% of the new entity will be owned by former CalAtlantic shareholders as well.
Investors have been shocked by homebuilding and utility stocks, as they continue to rise despite the increase in interest rates. As rates go higher, these groups usually become less attractive. But here they are, still powering higher, reasoned Cramer, who also manages the Action Alerts PLUS charitable trust portfolio.
Lennar has been "on fire," he added. It can successfully deal with various environmental laws, management has discipline and the company bought a ton of land during the Great Recession and the ensuing economic fallout.
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CEO Stuart Miller is a "genius" who has set up Lennar for big success after navigating through those tough times, Cramer reasoned. And it's not like the old days, where they were pumping out houses. It's more disciplined than that.
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