Market Overview

Homebuilding Stocks In Focus Following Lennar-WCI Deal

Homebuilding Stocks In Focus Following Lennar-WCI Deal

Close on the heels of an improved home buying sentiment index by 65 points in September, Lennar Corporation (NYSE: LEN) and WCI Communities Inc (NYSE: WCIC) struck a merger agreement.

Accordingly, Lennar would buy WCI for $23.50 a share in cash and stock, representing about 37 percent premium to September 21 closing price. The total transaction and enterprise values are $643 million and $809 million respectively.

The news could throw other stocks in the housing sector to volatility on Thursday. While some companies would be keen to take advantage of the favorable market conditions, others would try to expand their presence through M&A route.

Related Link: Investors Happily Greet Lennar's Q3 Results

Lennar and WCI indicated that the transaction included a portfolio of owned or controlled land of about 14,200 home sites, which are mostly in coastal Florida's highest growth and biggest markets. The transaction would be through a merger of WCI with a newly established subsidiary of Lennar.

While WCI has the option of engaging itself in 35-day go-to-shop attempt to get an improved offer price, Lennar has the opportunity of boosting the cash portion of the merger consideration. Currently, cash and stock components are divided into $11.75 each.

WCI Communities President and CEO Keith Bass commented, "Our agreement with Lennar testifies to the legacy and quality of our brand, the attractiveness of our homes and communities, and the talent of our team members. WCI Communities homebuyers and homeowners can expect a smooth transition and the continuation of the top-tier service they have come to expect from WCI."

The transaction is expected to be completed either in December or early next year.

At time of publication in Thursday's pre-market session, WCI was up 36.31 percent at $23.40, while Lennar was up 1.27 percent at $44.

The following stocks could see residual movements following the M&A news:

  • AV Homes Inc (NASDAQ: AVHI).
  • KB Home (NYSE: KBH).
  • LGI Homes Inc (NASDAQ: LGIH).
  • M.D.C. Holdings, Inc. (NYSE: MDC).
  • PulteGroup, Inc. (NYSE: PHM).
  • Taylor Morrison Home Corp (NYSE: TMHC).
  • Toll Brothers Inc (NYSE: TOL).

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Related Articles (LEN + WCIC)

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