LENNAR TO ACQUIRE U.S. HOME CORP.

South Florida’s Lennar Corp. on Thursday announced a major expansion that will create the nation’s largest homebuilding company.

Miami-based Lennar, now the nation’s fifth-largest homebuilder, said it will acquire U.S. Home Corp., of Houston, a specialist in retirement communities and semi-custom built homes, for $478 million in cash and stock. The combined companies would have revenues of $4.9 billion.

“I think it’s a phenomenal acquisition,” said Tim Jones, analyst for Ryan, Beck Southeast Research in Boca Raton. “Lennar will be the largest homebuilder in revenues and profits.”

U.S. Home has greater expertise in building “active adult” communities than Lennar, said Stuart Miller, chief executive of Lennar, who will be president and CEO of the combined companies.

U.S. Home’s Robert Strudler will be vice chairman and co-CEO; and Isaac Heimbinder will head the combined companies’ e-commerce initiatives.

“There will be no job loss. We won’t be combining or eliminating offices,” Miller said. Lennar has 4,700 employees; U.S. Home 2,400 employees.

Lennar and U.S. Home plan a kind of duplex organizational structure with each company maintaining its identity but sharing land, markets and resources.

Homebuilding at Lennar has been focused primarily on Florida, Texas, Arizona and Nevada. Miller said the acquisition of U.S. Home gives Lennar entry into lucrative markets, including Colorado, Minnesota, Ohio, New Jersey and Maryland.

U.S. Home has developed a semi-custom built home concept while Lennar offers an “everything’s included” system that lowers its supply costs. The companies build homes with an average price of $200,000.

“The most exciting part of the deal is U.S. Home’s expertise and success in retirement communities,” Miller said. “We expect to be able to grow this business tremendously over the next few years.”

The companies also say they plan to expand Lennar’s cable and security operations and form an e-commerce business that could offer furniture buying, home remodeling, and other services.

Under the transaction, which is expected to be completed in May, Lennar would buy the company at a 20 percent discount but assume $650 million in debt, Miller said. The company plans to refinance U.S. Home’s debt to bring it to a lower range, he added.

Analyst Sheldon Grodsky, of Grodsky Associates, said Lennar has been good at controlling debt, but that he expects some market consolidation eventually. “One of the reasons these deals don’t usually happen is you can’t buy a company like U.S. Home and get something you don’t want,” he said.

The transaction shows that “Lennar thinks homebuilders are very cheap and they’re getting the company at a reasonable price,” Grodsky said.

One risk to Lennar’s new partnership is a nine-month investigation by the Florida’s Attorney General’s Office into U.S. Home’s marketing and building practices. Florida’s Attorney General’s office has received between 40 and 50 complaints about U.S. Home, Assistant Attorney General Victoria Butler said.

Butler said the economic crimes unit is looking at how U.S. Home presented itself at time of sale, its inspection process and warranties. The investigation also is reviewing problems in a Sarasota community where 17 homes had to be fixed after officials discovered building code violations and excessive leaking.

“They’ve put themselves out as a high-quality builder. We’re looking at that,” Butler said, adding that U.S. Home has been cooperating with the investigation.

Asked in a press conference if liability was a reason for the merger, U.S. Home’s Strudler said no. “We know of no class actions or no threat of a class action in Sarasota. I’m not aware of any in the state,” he said.

U.S. Home’s shareholders will have a choice of $36 in cash for each share of stock they own or the combined companies’ stock, the companies said.

Lennar reportedly earned $172.7 million on record revenue of $3.1 billion for its fiscal year ended November 1999. Revenues were up 29 percent from a year earlier.

Lennar’s stock closed at $16.94, up 5.86 percent on Thursday in New York Stock Exchange trading. The company to be acquired fared much better: U.S. Home closed at $34.88, up 40 percent on Thursday.

Marcia Heroux Pounds can be reached at or 561-243-6650.