The Lennar Corporation and CalAtlantic Group have approved a definitive merger that will see them become the largest homebuilding company in the US.
The US$5.7 billion deal -- which also includes the assumption of $3.6 billion worth of debt -- is expected to generate annual cost savings of $250 million, with about $75 million in savings expected in fiscal 2018.
Under the agreement, each share of CalAtlantic stock will be exchanged for 0.885 shares of Lennar Class A common stock in a transaction valued at approximately $9.3 billion.
The new business will become an entity with combined revenues in excess of $17 billion and equity market capitalisation, based on current market prices, of approximately $18 billion.
The combined company will control approximately 240,000 homesites and will have approximately 1,300 active communities in 49 markets across 21 states, where approximately 50 per cent of the US population currently lives.
It is currently anticipated that the transaction will generate annual cost savings and synergies of approximately $250 million, with approximately $75 million achieved in fiscal year 2018.
D.R. Horton Inc. of Texas was hitherto the US' largest home builder.
Lennar chief executive Stuart Miller said the transaction is accretive before deal costs in fiscal year 2018 and significantly accretive in fiscal year 2019.
"The combined company will have a strong balance sheet and generate significant cash flow available to pay down debt and repurchase shares, which will improve returns on capital and equity," he said.
A decade after the global financial crisis and America's housing bust dealt a blow to many smaller home builders, the industry still struggles with rising costs for materials, land and labour and higher regulatory expenses.
The transaction is expected to close in the first calendar quarter of 2018.