Taylor Morrison Home Corporation (NYSE: TMHC) and William Lyon Homes (NYSE: WLH) Wednesday a definitive agreement under which Taylor Morrison will acquire all of the outstanding shares of William Lyon Homes common stock for per share consideration of $2.50 in cash and 0.800 shares of Taylor Morrison common stock. The deal is valued at $2.4 billion.
Taylor Morrison shares were down more than 6% to $22.12 in heavy midday trading Wednesday.
Taylor Morrison said the combine will create the nation's fifth-largest home builder based on home closings and puts Taylor Morrison in a Top 5 position in 16 of the combined 23 markets with an estimated 14,200 closings for the pro-forma combined company.
The transaction consideration mix consists of approximately 90% Taylor Morrison stock and 10 percent cash. Based on current trading, Taylor Morrison stockholders will own approximately 77% of the combined company while William Lyon Homes stockholders will own approximately 23%.
The transaction has been unanimously approved by the boards of both companies and will be submitted to the stockholders of William Lyon Homes for approval. The issuance of shares of Taylor Morrison common stock in the transaction will also be submitted to the stockholders of Taylor Morrison for approval. The transaction is expected to close late in the first quarter or early in the second quarter of 2020 and the closing is subject to the satisfaction of customary closing conditions. William H. Lyon, executive chairman and chairman of the board and holder of approximately 42% of the voting power of William Lyon Homes common stock, has agreed to vote all of the shares of William Lyon Homes common stock controlled by him in support of the transaction.
"The agreement to acquire William Lyon Homes marks a historic day for Taylor Morrison as we continue to grow our business in smart and meaningful ways," said Sheryl Palmer, Taylor Morrison chairman and CEO. "The combined business provides the unique opportunity to gain increased local scale and expertise within six of our major markets, while expanding Taylor Morrison into Washington, Oregon and Nevada. We've long aspired to be in the Pacific Northwest and have looked for the right point of entry at the right time and at the right price—and that's exactly what this represents. This will be our sixth builder acquisition in seven years and a demonstration of the proven discipline and expertise in M&A that we have developed over the years."
"William Lyon Homes' legacy spans more than six decades of outstanding construction and customer care, and our team of professionals has set a high standard for the home building industry," said Matthew R. Zaist, William Lyon Homes president and CEO. "The combined business will represent a powerhouse of a builder that can meet the strong demand of entry-level and first-time move-up buyers—consumer segments that represent 85% of William Lyon's closings last year. We are excited to join forces with Taylor Morrison and draw upon their proven track record and greater access to scale efficiencies to meet consumer demand with a reputable, quality product."
"William Lyon Homes is a family business rooted in strong values and tradition, which makes us delighted to join a company with one of the most recognized and highly regarded cultures in home building," said William H. Lyon, William Lyon Homes executive chairman and chairman of the board. "The decision to partner with Taylor Morrison was based on shared strategic alignment, like-minded core values, and a long history of integrity. We are confident in the success Taylor Morrison demonstrates through its reputation of leadership, quality construction and unparalleled customer experience and know our teams, our customers and our stockholders will be in good hands."
