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Freedonia Analyst Weighs in on Lennar's Acquisition of CalAtlantic

CLEVELAND, Oct. 30, 2017 /PRNewswire/ -- Lennar Corporation announced today that it will buy smaller competitor CalAtlantic Group, a leading homebuilder, in a transaction valued at $9.3 billion. The acquisition, which is expected to close in the first quarter of 2018, will create the largest homebuilder in the United States by revenue; however, the combined company is expected to rank behind DR Horton in housing completions.

According to Freedonia Group analyst Cara Brosius, the acquisition reflects the ongoing consolidation of the homebuilding industry. "In our recent Focus Report on US housing, we found that the number of participants in the housing industry has shrunk amidst merger and acquisition activity. During the housing bubble, the number of homebuilders and residential remodelers increased rapidly, reaching a peak of about 200,000 firms in 2005. However, the housing crisis caused many firms to exit the industry or consolidate. More robust credit standards, along with the availability of existing homes for sale, have continued to hinder revenues, discouraging many new firms from entering the industry. By acquiring one of its largest rivals, Lennar is significantly expanding its market share. The acquisition will solidify its position as the US' second largest homebuilder, increasing its number of housing completions by over 50%. In 2016, DR Horton was the largest homebuilder by this measure."

Furthermore, noted Brosius, the purchase offers Lennar the ability to increase its housing sales through organic growth, as CalAtlantic serves some Northeast and Midwest markets that Lennar does not share, such as Chicago, Delaware, Indiana, and Philadelphia. "The Northeast and Midwest regions, although expected to experience slower growth in housing completions than the rest of the US, provide Lennar with opportunities to enter new markets and expand upon CalAtlantic's current operations."

Lennar's purchase of CalAtlantic will decrease its competition in fast-growing markets such as Seattle, Washington. CalAtlantic entered the Seattle market in June 2017 via the purchase of Oakpointe's homebuilding operations. Through the upcoming acquisition, Lennar will obtain the Bridges housing community of single-family homes in Auburn, as well as developing communities Emerald Pointe and Maple Hills in Puyallup and Covington, respectively.

The US housing industry is highly fragmented and thus very competitive, noted Brosius. "However, the largest homebuilders have considerable advantages in many markets because of horizontal and vertical integration. Some homebuilders control much of their supply chain for fixtures, building products, and transportation. Additionally, mergers and acquisitions may allow large companies to dominate the housing market in certain regions. Firms such as Lennar can see sales increases by purchasing competitors with shared markets. For instance, in January 2013, NVR, which was the largest homebuilder in the Pittsburgh, Pennsylvania area, acquired Heartland Homes, its biggest competitor there. This purchase allowed NVR to assert further dominance in the Pittsburgh housing market."

More information about the US Housing industry can be found in Housing: United States, a 32-page report published by Freedonia Focus Reports: https://www.freedoniafocusreports.com/Housing-United-States-FF60024/

For more in-depth information on the outlook of the housing industry, along with the overall construction industry, check out the Construction and Building Products page featuring the following industry studies by The Freedonia Group:

Global Housing (October 2017)

Cabinets in the US (September 2017)

Metal Roofing in the US (August 2017)

Doors Market in the US (August 2017)

Plumbing Fittings in the US (August 2017)

Siding Distribution Market in the US (August 2017)

About The Freedonia Group – The Freedonia Group, a division of MarketResearch.com, is a leading international industrial research company publishing more than 100 studies annually. Since 1985 we have provided research to customers ranging in size from global conglomerates to one-person consulting firms. More than 90% of the industrial companies in the Fortune 500 use Freedonia Group research to help with their strategic planning. Each study includes product and market analyses and forecasts, in-depth discussions of important industry trends, and market share information. Studies can be purchased at www.freedoniagroup.com and are also available on www.marketresearch.com and www.profound.com.

Press Contact:
Corinne Gangloff
+1 440.684.9600
cgangloff@freedoniagroup.com

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SOURCE The Freedonia Group

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