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WCI Communities doesn’t find better offer; $643M merger with Lennar to move forward

"Go shop" period expires, but deal isn't done yet

When WCI Communities, a “lifestyle community developer and luxury homebuilder” headquartered in Florida, announced last month that it agreed to a “definitive merger agreement” with fellow homebuilder Lennar for $643 million, the company said that its board was going to take a 35-day “go shop” period to seek a better deal.

Now, the 35-day “go shop” period is over and the merger with Lennar is moving forward, but it’s not a done deal yet.

WCI announced Thursday that its board actively solicited alternative acquisition proposals throughout the go-shop period, but did not receive “any superior proposals” to top the Lennar deal during those 35 days.

In the deal, Lennar agreed to acquire all of the outstanding shares of WCI common stock in a cash and stock transaction, which values WCI at $23.50 per share.

That price is based on a 37% premium above where WCI closed on Sept. 21, 2016.

The deal values WCI at approximately $643 million in equity, or an enterprise value of $809 million, the company said.

In the end, WCI’s board didn’t find a better deal. WCI's board of directors unanimously approved the merger agreement with Lennar, and now the deal moves forward, with a caveat.

WCI is now subject to customary “no shop” provisions that limit the company’s ability to solicit alternative acquisition proposals from third parties or to provide confidential information to third parties, which basically means that WCI cannot actively pursue a better offer, but if one comes along, its board can consider it.

The “no shop” provision is subject to customary "fiduciary out" provisions, which again basically means that if WCI gets a better offer, it can take it.

According to WCI, it will file proxy materials with the Securities and Exchange Commission related to a special meeting of WCI's common stockholders to vote on the merger agreement.

The company said that anticipates that the special meeting will be held in December 2016 or January 2017. The company said that if the merger agreement is approved, the merger would be expected to close shortly thereafter.

If the merger is completed, the transaction would include a portfolio of owned or controlled land totaling approximately 14,200 home sites, located in most of coastal Florida’s “highest growth and largest markets,” WCI said.

According to data provided by WCI, the company completed 1,118 homes with an average sales price of $444,000 during the 12 months ended June 30, 2016.

WCI is more than just a homebuilding business. The company also operates a real estate brokerage, title and lifestyles amenities businesses, all of which would be included in the Lennar deal.

“Our agreement with Lennar testifies to the legacy and quality of our brand, the attractiveness of our homes and communities, and the talent of our team members,” Keith Bass, president and CEO of WCI, said in September when the deal was announced.

“WCI Communities homebuyers and homeowners can expect a smooth transition and the continuation of the top-tier service they have come to expect from WCI,” Bass continued. “The Lennar offer represents immediate and attractive value for our stockholders.” 

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3d rendering of a row of luxury townhouses along a street

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