Please ensure Javascript is enabled for purposes of website accessibility

Shares of CalAtlantic Surge on Buyout Offer

By Tyler Crowe - Updated Oct 30, 2017 at 12:24PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Lennar wants to shell over $9.3 billion for Cal Atlantic.

What happened

Shares of homebuilder CalAtlantic (CAA) are up 22% as of 10:30 a.m. EDT today. The spike comes on the heels of Lennar (LEN 5.71%) announcing it will buy CalAtlantic for $9.3 billion. For reference, shares of Lennar are down 2.7% as of this writing.

House with sold sign out front

Image source: Getty Images.

So what

In a deal to consolidate the homebuilding industry, Lennar is offering 0.885 shares of its company for every share of CalAtlantic outstanding, which would value CalAtlantic at $51.34 per share. CalAtlantic investors can also opt to take $48.26 per share, but that offer is only limited to $1.2 billion. The combined company, if the deal were to close, would have a top-three market share ranking in 24 of the 30 largest markets in the country.

We're starting to see a wave of consolidation in the homebuilder business as labor costs start to increase and demand for homes is high. Back in February, Lennar acquired WCI Communities, and D.R. Horton (DHI 5.89%) recently announced it was taking a 75% stake in land developer Forestar Group to obtain its developed lots. 

CAA Chart

CAA data by YCharts

Now what

It's hard to tell right now whether or not this was a great deal for Lennar, but for CalAtlantic shareholders, this must feel good. The success of this deal will depend on how much cost the two can wring out of their respective businesses and leverage their combined footprint. Considering Lennar's size already, it certainly has a chance of doing well.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

CalAtlantic Group, Inc. Stock Quote
CalAtlantic Group, Inc.
CAA
Lennar Corporation Stock Quote
Lennar Corporation
LEN
$74.60 (5.71%) $4.03
D.R. Horton, Inc. Stock Quote
D.R. Horton, Inc.
DHI
$70.09 (5.89%) $3.90

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
316%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/04/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.