The acquisition has been finalized at $6.8 billion, representing a significant increase from the previously reported $6.8 billion deal value. As reported by the Phoenix Business Journal, Taylor Morrison will become a wholly owned subsidiary of Berkshire Hathaway once the transaction closes. The Scottsdale-based homebuilder brings substantial scale to the deal, with revenue exceeding $8 billion, while the international conglomerate maintains a $1 trillion market cap. This represents a notable departure from Berkshire's trademark strategy of letting acquisitions run independently. The plan likely involves consolidating Taylor Morrison with Berkshire's existing homebuilding operations that are part of its Clayton Homes subsidiary.
The acquisition announcement has generated significant market interest, with Taylor Morrison shares soaring by as much as 23% in premarket trading on Monday following the deal announcement. As reported by Bloomberg, the stock reached $71.75 per share in early trading, reflecting strong investor confidence in the transaction. Berkshire agreed to pay Taylor Morrison investors $72.50 per share in the all-cash deal, representing a 24% premium over the company's previous closing price of $58.50. While Berkshire's shares slipped 1% on Monday, Raymond James analyst Buck Horne noted that it's possible Berkshire could face competition from private equity firms willing to pay more before shareholders vote on the offer.
CEO Greg Abel stated that "Berkshire is acquiring a best-in-class national homebuilder, led by an exceptional team and backed by a trusted reputation for customer experience." As reported by Bloomberg, this represents a notable departure from Berkshire's trademark strategy of letting acquisitions run independently. The existing Taylor Morrison management team, including CEO Sheryl Palmer, will continue to lead the company under Berkshire's ownership. Abel emphasized that "We are excited to welcome Taylor Morrison into Berkshire's portfolio, reflecting our long-standing commitment to housing, exemplified by Clayton Homes and our other building products businesses. Over time, we expect to unify our site-built homebuilding operations into a combined platform enabling us to deliver the dream of homeownership to more Americans." Abel has been overseeing all of Berkshire's non-insurance businesses since 2018 and became CEO in January, with Buffett remaining chairman and Berkshire's largest shareholder.
The acquisition comes as Berkshire was sitting on a cash pile that reached $397 billion at the end of the first quarter, its highest level ever. According to Bloomberg, Abel took over Berkshire Hathaway after legendary investor Warren Buffett retired last year. The deal comes during a period of underperformance for homebuilder stocks and as mortgage rates hit the highest since August. While investors have expressed support for Abel's leadership, Berkshire's shares have fallen 5.6% this year, underperforming the S&P 500's 10.7% gain in the same period. CFRA Research analyst Cathy Seifert noted that "Given Greg's strength as an operator it will be interesting to see if he does consolidate these units to get some greater scale and efficiencies."
Taylor Morrison is one of the largest community developers and homebuilders in the US and also offers financial services like home loans, titles, escrow and insurance to consumers. As reported by Bloomberg, the Scottsdale, Arizona-based firm has more than 350 communities across 12 states. This isn't Berkshire's first investment in the home-building business, as the company also owns Clayton Homes and owns shares in Lennar Corp. Both Lennar and Taylor Morrison were involved in the proposed "Trump Homes" rent-to-own program for entry-level houses with an objective to construct up to 1 million homes, valued at $250 billion, utilizing funding from private investors.
The deal comes at a time when homebuilding in the US has seen declines, with new residential construction decreasing 2.8% in April according to government figures. According to Bloomberg, starts of single-family homes declined 9%, the most since August. CEO Palmer noted that "Berkshire Hathaway's long-term orientation is uniquely well-suited to the multi-year investment cycle of homebuilding." The sale is expected to close in the second half of the year, with Goldman Sachs Group Inc. and Moelis & Co. serving as financial advisers, while Simpson Thacher & Bartlett LLP is serving as legal adviser and Mayer Brown LLP as counsel to Taylor Morrison.
