Arizona-based Taylor Morrison, the nation's seventh-largest revenue builder, said Tuesday that it will buy William Lyon Homes, a California-based builder with a large footprint in the Pacific Northwest, as well as in Colorado and Texas.  The deal estimates William Lyon Homes at $ 2.4 billion, including taking on debt. That translates into a purchase price multiple of 1.0x the book, according to Taylor Morrison.
Taylor Morrison will acquire all outstanding shares of William Lyon Homes common stock for one share of $ 2.50 cash and 0.80 shares of Taylor Morrison common stock.
The transaction will consist of approximately 90% of Taylor Morrison shares and 10% cash. Based on current trading, Taylor Morrison's shareholders will own approximately 77% of the combined company, while William Lyon Homes' shareholders will own approximately 23%. It is expected to close in the second quarter of 2020.
Shares of William Lyon Homes jumped 1
This is the sixth acquisition by builder Taylor Morrison in seven years and will move him to the fifth largest U.S. builder by revenue.
"Combined business provides a unique opportunity to scale up and grow expertise across six of our core markets while expanding Taylor Morrison to Washington, Oregon and Nevada," said Cheryl Palmer, CEO of Taylor Morrison, said he has been watching the Pacific Northwest for years, but wants to wait for the recent "reset" on the market. "So let's skip this to make the weather pretty exciting," Palmer added.
Taylor Morrison also will become the third goal emin builder in denver, compared to current 14.
William Lyon, founded in 1954 and headquartered in Newport Beach, California, had its best year in 2018, selling just over 4,000 homes and However, sales were lagging at the end of the year and in the first quarter of this year because of higher mortgage interest rates.
"The decision to partner with Taylor Morrison was based on shared strategic alignment consistent, underlying core values, and a long history of integrity, "says Matthew Zaist, President and CEO of William Lyon. "We are confident of the success that Taylor Morrison has demonstrated through her reputation for leadership, quality construction and unparalleled customer experience, and we know that our teams, our customers and our shareholders will be in good hands."
William Lyon will give Taylor Not only is Morrison a larger geographical scale, but also a larger footprint in the entry-level market, which is extremely strong at the moment.
"Our bread and butter are first-time entry, relocation and active adults," Palmer said. "William Lyon's business is about 54% entry-level buyer. Combine the two, and this puts us in a very attractive, medium to high 30% entry-level range. Add relocation and it becomes more than three – the headquarters of our entire business. "
Palmer said he expects $ 80 million in annual synergies from the transaction. This includes reducing overheads in markets where companies overlap; some employees will be reassigned, but some will not.
The combined company is expected to generate more than $ 6.7 billion in revenue, with approximately 14,200 foreclosures and more than 83,000 lots owned and controlled.
—CNBC's Yun Li contributed to this report.