TECHNICAL OLYMPIC USA'S RECENT acquisition of Transeastern Homes may just mark the dawning of a new age—that of the mega-builder. According to JMP Securities, who represented the seller, the transaction is the largest private home builder acquisition in the industry's history. The deal, which brings together two of the top 40 builders (as rated by BUILDER magazine), is expected to close in the third quarter of this year for an undisclosed purchase price.
The result of the transaction will be a joint venture between TOUSA and Arthur Falcone, CEO and co-chairman of the Falcone Group and majority owner of Transeastern. TOUSA will manage the business, operating the home building assets acquired. Most of Transeastern's associates will continue to be employed either by TOUSA or the joint venture.
With the acquisition, TOUSA's resource pool in Florida deepens. The company estimates that the joint venture will deliver more than 3,500 homes, generating revenues of approximately $1 billion in 2006. More importantly, as land becomes increasingly scarce, TOUSA stands to gain control of approximately 22,000 lots in five Florida markets. “The land inventory Technical Olympic picks up [from Transeastern] makes it a top five player in Florida,” says Hector Calderon, an investment banker with JMP Securities.
The buyout further compliments TOUSA's announcement that it plans to enter the Tampa-St. Petersburg market. Bob Meadows, who has more than 20 years of building experience in the West Central Florida market, will run the new division as president. Meadows was most recently the COO of Medallion Homes.
The homes in Florida will be built under the Engle Homes brand. The expansion into the Tampa-St. Petersburg area shores up the builder's stronghold in the Sunshine State as its 11th area of operation.