Atlanta's No. 2 Home Builder Century Communities Merging with Builder UCP
Staff Report From Metro Atlanta CEO
Thursday, April 13th, 2017
Century Communities, Inc., a leading homebuilder of single-family homes, townhomes and flats in select U.S. markets, and UCP, Inc. jointly announced a definitive agreement pursuant to which the two companies have agreed to merge in a transaction with an aggregate value of $336 million, including the payment of certain indebtedness. The combined company will have an equity market capitalization of over $700 million and an enterprise value of over $1.3 billion.
The combined company will be in 10 states, 17 markets and 117 communities, with revenues of more than $1.3 billion and inventories of more than $1.2 billion (calculated on a pro forma basis at or for the year ended December 31, 2016).
In the merger, each outstanding share of UCP common stock will be converted into the right to receive $5.32 in cash and 0.2309 of a newly issued share of Century common stock. Based on the closing sale price of Century’s common stock as reported yesterday on the NYSE, the implied value of the total stock and cash consideration to be received by UCP’s stockholders in the merger is $11.35 per share, and UCP’s stockholders would own, on a pro forma basis, approximately 16.4% of the combined company. The transaction is expected to close by the end of the third quarter of 2017, subject to customary closing conditions, including the adoption of the merger agreement by UCP’s stockholders.
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Increased Scale – The combined company will own or control approximately 25,000 lots and will have a backlog in excess $450 million (calculated on a pro forma basis as of December 31, 2016).
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Geographically Diverse Portfolio with Essentially No Overlap – The combined company portfolio will consist of lots and communities in California, Colorado, Georgia, Nevada, North Carolina, South Carolina, Tennessee, Texas, Utah and Washington. The combination provides for an expanded, national footprint across high-growth markets, which we believe enhances growth prospects while mitigating risks against any potential price and value uncertainties in regional homebuilding markets.
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Seamless Integration and Enhanced Platform – Century and UCP share culturally similar management philosophies and strategic growth objectives which should provide for a unified operating team with extensive land acquisition, entitlement and development expertise.
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Earnings Accretion – The merger is expected to be accretive to the company’s 2018 earnings per share as a result of revenue and cost synergies and economies of scale.
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Increased Market Liquidity – The merger is expected to broaden the combined company’s investor base and increase share liquidity due to the issuance of approximately 4.35 million shares of Century common stock.
Dale Francescon, Co-Chief Executive Officer of Century stated, “We are pleased to announce the combination of Century and UCP which will position the combined company as a leading homebuilder with significant national scale. UCP’s highly complementary land positions combined with Century’s existing portfolio creates a diverse national growth platform and footprint.”
Rob Francescon, Co-Chief Executive Officer of Century noted, “The merger facilitates expanded product offerings across the full buyer segment spectrum with cutting edge designs at multiple price points for maximum customer reach. The combined company is expected to generate significant operating efficiencies which should create a rate of revenue growth and increased stockholder value in excess of what either company could achieve on a standalone basis.”
Dustin Bogue, Chief Executive Officer of UCP, commented, “We are pleased with the substantial progress we have made since our founding in 2004 to execute on our strategy, expand our regional presence and solidify our positions in very attractive Western and Southeastern markets. The merger with Century provides all of our stockholders with an opportunity to continue a portion of their equity investment and participate in the earnings growth, value accretion, synergies and enhanced prospects of a leading homebuilder with a more geographically diverse and risk-resistant national footprint. At the same time our stockholders will receive immediate cash liquidity for a portion of their investment in UCP.”
The transaction has been unanimously approved by the board of directors of both Century and UCP. UCP’s largest shareholder, PICO Holdings, Inc., has entered into a voting agreement pursuant to which it has committed to vote 57% of UCP’s outstanding voting power for the adoption of the merger agreement. The voting agreement terminates automatically if the merger agreement is terminated in accordance with its terms.
Century will fund the cash portion of the merger with available borrowing capacity under its $400 million senior unsecured credit facility.