Beazer buys Crossmann By Iris Richmond
In what promises to give Beazer Homes a foothold into a new market, its first in the Midwest, the Atlanta-based builder has signed a merger agreement with Crossmann Communities in Indianapolis for $610 million. Crossmann's principal shareholders agreed to a 60-40 ratio ($190 million in cash, $103 million of assumed debt, and $310 million in stock at the closing price).
Beazer CEO Ian McCarthy sees the merger as a product of the times. "There are going to be a number of smaller companies integrated into other companies. It's inevitable in [this] market. The process of land entitlement is very difficult. Only the big companies have the resources and the financial depth to navigate smoothly through the process."
Crossmann and Beazer began formal discussions about the deal last December. "We had been considering combining for some time because we've found it difficult to grow," says Jennifer Holihen, Crossmann's CFO. "Our lean structure made it impossible to compete for acquisitions with the reservoirs of equity attached to bigger companies. We want to take on only what our balance sheet can handle, because it's tougher for us to pay the price if we make a mistake," she says.
For Beazer, the country's ninth-largest builder, Crossmann's appeal was its focus on entry-level buyers. "[Crossmann] has the lowest-priced first time homes of any public builder, $134,000 to our $190,000. [It] gives Beazer very attractively priced homes," McCarthy says. Crossmann's John Scheumann, CEO and chairman, and Dick Crosser, vice chairman, will stay on for one year as consultants; former Crossmann CFO Steve Dunn will take over company operations when the merger closes in June.
Crossmann, ranked 12th in the Builder 100, brings 30,000 lots to the deal. The combined operation will deliver more than 15,500 homes yearly.
BIG BUILDER Magazine, March 2002