Lennar Agrees to Buy WCI Communities for About $643 Million

(Bloomberg) -- Lennar Corp., the second biggest U.S. homebuilder, agreed to buy WCI Communities Inc. in a deal that values the Florida real estate company at about $643 million and expands Lennar’s operations in the state.

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 companies said. WCI’s board has approved the transaction, which is based on an enterprise value of $809 million, according to a statement. WCI shares soared on the news, gaining 40 percent to $24.03 at 11:30 a.m. in New York. Lennar rose 1.3 percent to $44.02.

Lennar, based in Miami, loaded up on land during the crash, when prices were cheap, and is now benefiting as low borrowing costs and job growth bolster buyer demand. The transaction would combine two of the largest builders in Florida and increase Lennar’s market share and scale in the state, Jade Rahmani, an analyst with Keefe Bruyette & Woods Inc., said in a note to clients.

“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 Chief Executive Officer 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.”

Bonita Springs, Florida-based WCI develops single-family homes and condominiums, including luxury high-rise towers that cater to move-up and second-home buyers. The company also has real estate brokerage and title-service businesses.

Deal Structure

The transaction will be in the form of a merger of WCI and a newly formed Lennar subsidiary, the companies said. Consideration for each WCI share is currently expected to be $11.75 in cash and a fraction of a share of Lennar Class A common stock with a value of $11.75, but Lennar has the option of varying the proportions including paying the entire $23.50 a share in cash. The transaction is structured to be tax-free to WCI shareholders, the companies said.

Under the agreement, WCI will have 35 days to solicit and evaluate alternative proposals.

The deal includes land owned or controlled by WCI totaling about 14,200 home sites, located in most of coastal Florida’s highest-growth and largest markets, the companies said. In the 12 months through June, WCI delivered 1,118 homes with an average sales price of $444,000.

Lennar delivered 6,779 homes in its fiscal third quarter, with an average selling price of $362,000. New orders rose 8 percent to 7,018 homes, the company said earlier this week.

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