CalAtlantic Group, Inc.
CalAtlantic Group, Inc. (Form: DEFM14A, Received: 01/05/2018 06:30:02)
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

Filed by the Registrant  ☒                             Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

  Preliminary Proxy Statement
  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material Pursuant to § 240.14a-12

CALATLANTIC GROUP, INC.

(Name of Registrant as Specified in its Charter)

 

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (check the appropriate box):

  No fee required.
  Fee computed on table per Exchange Act Rules 14a-6(i)(1) and 0-11.
  (1)  

Title of each class of securities to which transaction applies:

 

     

  (2)  

Aggregate number of securities to which transaction applies:

 

     

  (3)  

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

     

  (4)  

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Total fee paid:

 

     

  Fee previously paid with preliminary materials.
  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1)  

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  (2)  

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LOGO   

LOGO

January 4, 2018

PROPOSED MERGER—YOUR VOTE IS VERY IMPORTANT

 

 

Dear CalAtlantic and Lennar Stockholders,

CalAtlantic Group, Inc. (“CalAtlantic”) and Lennar Corporation (“Lennar”) have agreed to a strategic merger (the “Merger”) that will create the largest homebuilder in the United States and is expected to generate significant operating and administrative cost savings for the combined entity.

If the Merger is completed, each holder of a share of CalAtlantic common stock will become entitled to receive 0.885 shares of Lennar Class A common stock (NYSE:LEN) and 0.0177 shares of Lennar Class B common stock (NYSE:LENB). CalAtlantic stockholders will have the option to receive cash equal to $48.26 per CalAtlantic share instead of Lennar Class A and Class B common stock, subject to proration such that the CalAtlantic stockholders who elect to receive cash will receive in the aggregate no more than $1,162,250,000 in cash (which limits the cash elections to 24,083,091 shares of CalAtlantic common stock). If cash elections exceed this maximum amount, the cash paid to stockholders who elect to receive cash will be prorated, with the remainder of the merger consideration to which they are entitled being in the form of Lennar Class A and Class B common stock. On the last trading day before the Agreement and Plan of Merger, dated October 29, 2017 (the “merger agreement”), was signed, 0.885 shares of Lennar Class A common stock had a market value of $51.34, based on the closing price per share for such shares on the New York Stock Exchange (the “NYSE”) as of that date. The additional right to receive Lennar Class B common stock is the result of a stock dividend that Lennar distributed after the date of the merger agreement, which CalAtlantic stockholders will receive as though they had been Lennar stockholders on the record date for the stock dividend. On January 2, 2018, the most recent practicable trading day before the date of this joint proxy statement/prospectus, the last sale price of Lennar Class A common stock reported on the NYSE was $64.84 per share and the last sale price of Lennar’s Class B common stock reported on the NYSE was $52.61 per share. Based on those prices, the market value of 0.885 shares of Lennar Class A common stock and 0.0177 shares of Lennar Class B common stock was $58.31. The value of such Class A and Class B shares when the Merger is consummated will depend on the price per share of each class of Lennar’s common stock on the NYSE at that time. The Merger is intended to qualify as a “reorganization” for U.S. tax purposes, which means that CalAtlantic stockholders will not have a taxable event when they receive Lennar stock. They will have a taxable event to the extent they receive cash.

The CalAtlantic stockholders are being asked to vote on a proposal to adopt the merger agreement. The proposal requires the affirmative vote of the holders of a majority of the outstanding shares of CalAtlantic common stock entitled to vote on the proposal. MP CA Homes LLC, which owns approximately 24.4% of the outstanding shares of CalAtlantic, has agreed to vote all its shares in favor of the proposal.

The Lennar stockholders are being asked to vote on proposals to (i) approve the issuance of the Class A and Class B common stock in the Merger, and (ii) approve an amendment to Lennar’s certificate of incorporation increasing the number of authorized shares of Class A common stock to 400,000,000 shares from the 300,000,000 shares that are currently authorized. Without such an increase, the number of authorized but unissued shares of Lennar Class A common stock would be insufficient to enable Lennar to issue all of the shares of Lennar Class A common stock it would be required to issue in the Merger, if no CalAtlantic stockholders elect to receive cash in connection with the Merger. However, MP CA Homes, LLC has agreed that it will be deemed to have elected to receive cash with regard to the number of shares equal to any difference between the maximum


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number of shares as to which CalAtlantic stockholders can make a cash election, and the number of shares as to which CalAtlantic stockholders elect to receive cash in the Merger. Based on the number of shares of CalAtlantic common stock outstanding on December 15, 2017, and taking account of the fact that the merger consideration for 24,083,091 shares will be cash, Lennar would issue in the merger 81,508,215 shares of Class A common stock and 1,630,164 shares of Class B common stock. Lennar will also issue additional shares in the future as result of conversions of CalAtlantic convertible debt securities and exercises of CalAtlantic options, restricted stock units and stock appreciation rights.

The proposal to approve the issuance of Class A and Class B common stock in the Merger requires the affirmative vote of a majority in voting power of the shares of Class A and Class B common stock that are voted at a meeting of Lennar stockholders at which a quorum is present (treating abstentions as votes against), voting together as though they were a single class. The proposal to amend the certificate of incorporation to increase the number of shares of Class A common stock that Lennar is authorized to issue requires (i) the affirmative vote of a majority in voting power of the outstanding shares of Class A and Class B common stock, voting together as though they were a single class and (ii) a majority of the shares of Class A common stock that are voted with regard to the proposal, in each case, at a meeting of Lennar stockholders at which a quorum is present. Stuart Miller, the Chief Executive Officer and a director of Lennar, and entities owned by trusts of which Mr. Miller and members of his family are the beneficiaries, which collectively have the right to cast approximately 39.0% of all the votes that can be cast by Lennar stockholders, have agreed to vote all their shares in favor of both of the proposals (subject to certain exceptions described in the accompanying joint proxy statement/prospectus). However, Mr. Miller and the entities owned by his family trusts own less than 1% of the outstanding Class A common stock, and therefore will not have a substantial impact on the separate vote of the Class A stockholders.

It is very important that you vote your shares. With regard to CalAtlantic stockholders, the CalAtlantic board of directors unanimously recommends that you vote “FOR” the proposal to adopt the merger agreement. With regard to Lennar stockholders, the Lennar board of directors unanimously recommends that you vote “FOR” the proposal to approve the issuance of shares in the Merger and “FOR” the proposal to amend Lennar’s certificate of incorporation to increase the number of shares of Class A common stock that Lennar is authorized to issue. Failure to vote will have the same effect as voting against the CalAtlantic proposal to adopt the merger agreement, and against the Lennar proposal to amend its certificate of incorporation (with regard to the combined vote of the Lennar Class A and Class B common stock).

The accompanying joint proxy statement/prospectus contains detailed information about the CalAtlantic and Lennar stockholders meetings and about the matters to be voted upon at those meetings. You should read the joint proxy statement/prospectus carefully, including the section captioned “ Risk Factors ” which begins on page 26, before you vote.

We look forward to the exciting strategic combination of CalAtlantic and Lennar.

Sincerely,

 

Stuart Miller

Chief Executive Officer

Lennar Corporation

  

Larry Nicholson

Chief Executive Officer and President

CalAtlantic Group, Inc.

 

 

Neither the Securities and Exchange Commission nor any other federal or state governmental agency has approved or disapproved the Merger or the securities to be issued in connection with the Merger or determined whether the accompanying joint proxy statement/prospectus is accurate or complete. Any representation to the contrary would be a criminal offense.

This joint proxy statement/prospectus is dated January 4, 2018, and is first being mailed to CalAtlantic and Lennar stockholders on or about January 5, 2018.

 


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LOGO

CalAtlantic Group, Inc.

1100 Wilson Boulevard, #2100

Arlington, Virginia 22209

 

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON FEBRUARY 12, 2018

 

 

To the Stockholders of CalAtlantic Group, Inc.:

We are pleased to invite you to attend the special meeting of stockholders of CalAtlantic Group, Inc., a Delaware corporation, which we refer to as “CalAtlantic,” which special meeting will be held at CalAtlantic’s primary California office, at 15360 Barranca Parkway, Irvine, CA 92618, on February 12, 2018 at 9:30 a.m., Pacific time, for the following purposes:

 

1. CalAtlantic Merger Proposal: To consider and vote on the proposal to adopt the Agreement and Plan of Merger, dated as of October 29, 2017, which we refer to as the “merger agreement,” by and among CalAtlantic, Lennar Corporation, a Delaware corporation, which we refer to as “Lennar,” and Cheetah Cub Group Corp., a newly formed Delaware corporation and a wholly-owned subsidiary of Lennar, which we refer to as “Merger Sub,” a copy of which is included as Annex A to the joint proxy statement/prospectus of which this notice is a part;

 

2. CalAtlantic Merger-Related Compensation Proposal: To consider and vote on the proposal to approve, on an advisory (non-binding) basis, specified compensatory arrangements between CalAtlantic and its named executive officers relating to the proposed merger with Merger Sub, as described in the accompanying joint proxy statement/prospectus of which this notice is a part;

 

3. CalAtlantic Adjournment Proposal: To vote upon one or more proposals to adjourn the CalAtlantic special meeting, if necessary or appropriate, including adjournments to solicit additional proxies if there are not sufficient votes to approve the foregoing proposals; and

 

4. CalAtlantic All Other Business Proposal : To transact such other business as may validly come before the special meeting and any postponement or adjournment thereof.

Please refer to the joint proxy statement/prospectus of which this notice is a part for further information with respect to the business to be transacted at the CalAtlantic special meeting.

The CalAtlantic board of directors has unanimously approved the merger agreement and the transactions contemplated by the merger agreement, including CalAtlantic’s merger with and into Merger Sub, with Merger Sub continuing as the surviving corporation in such merger, subject to the terms and conditions of the merger agreement, which we refer to as the “Merger,” and determined that the merger agreement and the transactions contemplated by the merger agreement, including the Merger, are advisable and in the best interests of CalAtlantic and its stockholders. The CalAtlantic board of directors unanimously recommends that the CalAtlantic stockholders vote “FOR” each of the proposals being submitted to a vote of the CalAtlantic stockholders at the CalAtlantic special meeting .

The CalAtlantic board of directors has fixed the close of business on January 4, 2018 as the record date for determination of the CalAtlantic stockholders entitled to receive notice of, and to vote at, the CalAtlantic special


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meeting or any adjournments or postponements thereof. Only CalAtlantic stockholders of record at the close of business on the record date will be entitled to notice of or to vote at the CalAtlantic special meeting or any adjournments of it. The presence, either in person or represented by proxy, of the holders of record of a majority in voting interest of shares of CalAtlantic’s common stock that is entitled to vote at the meeting is necessary to constitute a quorum for the transaction of business at the meeting. To ensure that your vote is recorded, please provide your voting instructions as soon as possible , even if you plan to attend the meeting in person. We encourage you to vote via the Internet or by telephone. You also have the option of voting by completing, signing, dating and returning the proxy or voting information card that accompanied the printed materials. Submitting your vote via the Internet or by telephone or proxy card will not affect your right to vote in person if you decide to attend the special meeting. Your proxy will be disregarded as to any matter on which you vote in person.

The proposal to adopt the merger agreement requires the affirmative vote of a majority of the outstanding shares of CalAtlantic common stock entitled to vote on the proposal. The proposal to approve certain compensatory arrangements between CalAtlantic and its named executive officers requires the affirmative vote of a majority in voting interest of the CalAtlantic stockholders present in person or represented by proxy at the CalAtlantic special meeting at which a quorum is present and entitled to vote on the proposals, although such vote will not be binding on CalAtlantic or the CalAtlantic board of directors or any of its committees. A list of the names of CalAtlantic stockholders of record will be available for ten days prior to the CalAtlantic special meeting for any purpose germane to the special meeting between the hours of 9:00 a.m. and 5:00 p.m., Eastern time, at CalAtlantic’s headquarters, 1100 Wilson Boulevard, #2100, Arlington, Virginia 22209. The CalAtlantic stockholder list will also be available at the CalAtlantic special meeting for examination by any stockholder present at such meeting.

Your vote is very important. Whether or not you expect to attend in person, we urge you to submit a proxy to vote your shares as promptly as possible by (1) logging onto http://www.proxyvote.com and following the prompts on your proxy card; (2) dialing 1-800-690-6903 and listening for further directions; or (3) signing and returning the enclosed proxy card in the postage-paid envelope provided, so that your shares may be represented and voted at the CalAtlantic special meeting.

The enclosed joint proxy statement/prospectus provides a detailed description of the Merger and the merger agreement as well as a description of the issuance of shares of common stock of Lennar or, at the election of CalAtlantic stockholders, cash to CalAtlantic stockholders pursuant to the Merger and a description of Lennar’s certificate of incorporation and bylaws. We urge you to read this joint proxy statement/prospectus, including any documents incorporated by reference, and the annexes carefully and in their entirety. If you have any questions concerning the Merger or this joint proxy statement/prospectus, would like additional copies of this document or need help voting your shares of CalAtlantic common stock, please contact CalAtlantic’s proxy solicitor:

Georgeson LLC

1290 Avenue of the Americas, 9 th Floor

New York, NY 10104

CalAtlantic@georgeson.com

(877) 507-1756 (toll-free)

By Order of the Board of Directors of CalAtlantic,

John P. Babel

Executive Vice President, General Counsel and Secretary

Irvine, California

January 4, 2018


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LOGO

Lennar Corporation

700 Northwest 107th Avenue

Miami, Florida 33172

 

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON FEBRUARY 12, 2018

 

 

To the Stockholders of Lennar Corporation:

Notice is hereby given that a special meeting of stockholders of Lennar Corporation, which we refer to as “Lennar,” will be held on February 12, 2018, at 11:00 a.m., Eastern time, at Lennar’s offices at 700 Northwest 107 th Avenue, Miami, Florida 33172, for the following purposes:

 

1. Lennar Merger Proposal: To consider and vote on a proposal to approve the issuance of shares of Lennar’s Class A common stock and Class B common stock in connection with the merger of CalAtlantic Group, Inc. with a newly formed wholly-owned subsidiary of Lennar, as contemplated by an Agreement and Plan of Merger, dated as of October 29, 2017, by and among CalAtlantic Group, Inc., Lennar and Cheetah Cub Group Corp., a copy of which is included as Annex A to the joint proxy statement/prospectus of which this notice is a part;

 

2. Lennar Authorized Share Proposal: To consider and vote on a proposal to approve an amendment to Lennar’s certificate of incorporation increasing the number of authorized shares of Lennar’s Class A common stock from 300,000,000 shares to 400,000,000 shares; and

 

3. Lennar Adjournment Proposal: To consider and vote on a proposal to approve the adjournment of the Lennar special meeting, if necessary in order to enable Lennar to solicit additional votes, if at the time of the stockholders meeting there are not sufficient votes to approve the Lennar Merger Proposal and the Lennar Authorized Share Proposal.

Lennar does not expect to transact any other business at the Lennar special meeting.

The accompanying joint proxy statement/prospectus further describes the matters to be considered at the Lennar special meeting.

The Lennar board of directors has set January 4, 2018 as the record date for the Lennar special meeting. Only Lennar stockholders of record at the close of business on the record date will be entitled to notice of or to vote at the Lennar special meeting or any adjournments of it.

The holders of the Class A common stock are entitled to one vote per share on all matters, including the separate vote of the holders of the Class A common stock regarding the Lennar Authorized Share Proposal. The holders of the Class B common stock are entitled to 10 votes per share with regard to all matters as to which they are entitled to vote.

Your vote is very important. The Lennar Merger Proposal requires the affirmative vote of a majority in voting power of the shares of Class A common stock and Class B common stock that are voted with regard to it at a meeting of Lennar stockholders at which a quorum is present (treating abstentions as votes against), voting together as though they were a single class. The Lennar Authorized Share Proposal requires the affirmative vote of both the holders of a majority in voting power of the outstanding shares of Class A common stock and Class B common stock, voting together as though they were a single class, and the holders of a majority of the shares of Class A common stock that are voted with regard to the proposal


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at a meeting of Lennar stockholders at which a quorum is present. Failure to vote will have the same effect as voting against the Lennar Authorized Share Proposal (with respect to the combined vote of the Class A and Class B common stock).

To ensure your representation at the Lennar special meeting, please complete and return the enclosed proxy card, which you can do by mail, or submit your proxy by telephone or through the Internet. Please submit your proxy promptly whether or not you expect to attend the Lennar special meeting. Submitting a proxy will not prevent you from being able to vote in person at the Lennar special meeting. Your proxy will be disregarded as to any matter on which you vote in person.

The Lennar board of directors unanimously recommends that stockholders vote all of their shares of Class A common stock and Class B common stock “FOR” the Lennar Merger Proposal, “FOR” the Lennar Authorized Share Proposal, and “FOR” the Lennar Adjournment Proposal.

By Order of the Board of Directors of Lennar Corporation,

Mark Sustana

General Counsel and Secretary

January 4, 2018

PLEASE SUBMIT YOUR PROXY PROMPTLY, FOLLOWING THE INSTRUCTIONS ON THE ENCLOSED PROXY CARD. IF YOU HAVE QUESTIONS ABOUT THE PROPOSALS OR ABOUT SUBMITTING A PROXY, PLEASE CALL MACKENZIE PARTNERS, INC. TOLL-FREE AT (800) 322-2885 (BANKS AND BROKERS CALL COLLECT AT (212) 929-5500).


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JOINT PROXY STATEMENT/PROSPECTUS

 

 

ABOUT THIS DOCUMENT

This document, which forms part of a registration statement on Form S-4 filed with the Securities and Exchange Commission, which we refer to as the “SEC,” by Lennar (File No. 333-221738), constitutes a prospectus of Lennar for purposes of Section 5 of the Securities Act of 1933, as amended, which we refer to as the “Securities Act,” with respect to the shares of Lennar Class A common stock and Class B common stock to be issued to CalAtlantic stockholders pursuant to the merger agreement, a copy of which is attached as Annex A to this joint proxy statement/prospectus (including provisions relating to CalAtlantic convertible debt securities, options, restricted stock units and stock appreciation rights). This document also constitutes a notice of meeting with respect to the special meeting of CalAtlantic stockholders and a notice of meeting with respect to the special meeting of Lennar stockholders, and a proxy statement for each of CalAtlantic and Lennar for purposes of Section 14(a) of the Securities Exchange Act of 1934, as amended, which we refer to as the “Exchange Act.”

You should rely only on the information contained in or incorporated by reference into this joint proxy statement/prospectus. No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this joint proxy statement/prospectus. This joint proxy statement/prospectus is dated January 4, 2018. The information contained in this joint proxy statement/prospectus is accurate only as of that date or, in the case of information in a document incorporated by reference, as of the date of that document, unless the information specifically indicates that another date applies. Neither the mailing of this joint proxy statement/prospectus to CalAtlantic stockholders or Lennar stockholders nor the issuance by Lennar of Class A common stock and Class B common stock pursuant to the merger agreement will create any implication to the contrary.

This joint proxy statement/prospectus, including the documents incorporated by reference into it, contains statements of opinion or belief regarding market conditions and similar matters. In many instances those opinions and beliefs are based upon general observations by members of CalAtlantic’s or Lennar’s management, anecdotal evidence and their experience in the conduct of the respective companies’ businesses, without specific investigation or statistical analyses. Therefore, while they reflect the applicable company’s view of the industries and markets in which it is involved, they should not be viewed as reflecting verifiable views that are necessarily shared by all who are involved in those industries or markets.

This joint proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction in which or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction.

You should not construe the contents of this joint proxy statement/prospectus as legal, tax or financial advice. You should consult with your own legal, tax, financial or other professional advisors.

The information concerning CalAtlantic contained in this joint proxy statement/prospectus or incorporated by reference has been provided by CalAtlantic, and the information concerning Lennar contained in this joint proxy statement/prospectus or incorporated by reference has been provided by Lennar.

ADDITIONAL INFORMATION

This joint proxy statement/prospectus incorporates by reference important business and financial information about CalAtlantic and Lennar from other documents that are not included in or delivered with this joint proxy statement/prospectus. For a listing of the documents incorporated by reference into this joint proxy statement/prospectus, see “Where You Can Find More Information” beginning on page 133.


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You can obtain any of the documents incorporated by reference into this joint proxy statement/prospectus free of charge by requesting them from CalAtlantic’s or Lennar’s proxy solicitor in writing or by telephone at the following addresses and telephone numbers:

 

   If you are a CalAtlantic stockholder:      If you are a Lennar stockholder:
  

Georgeson LLC

1290 Avenue of the Americas, 9 th  Floor

New York, NY 10104

CalAtlantic@georgeson.com

(877) 507-1756 (toll-free)

    

MacKenzie Partners, Inc.

105 Madison Avenue

New York, New York 100016

proxy@mackenziepartners.com

(800) 322-2885 (toll-free)
(212) 929-5500 (banks and brokers only)

If you would like to request copies of any documents, please do so by February 2, 2018 in order to receive them before the special meetings.

You can also obtain copies of any of the documents incorporated by reference into this joint proxy statement/prospectus without charge through the SEC website at www.sec.gov . In addition, you can obtain copies of documents filed by CalAtlantic with the SEC by accessing CalAtlantic’s website at www.calatlantichomes.com under the tab “Investors” and then under the heading “Financials” and the subheading “SEC Filings.” You can also obtain copies of documents filed by Lennar with the SEC by accessing Lennar’s website at www.lennar.com under the tab “Investor Relations” and then under the heading “Financials” and the subheading “SEC Filings.”

We are not incorporating the contents of the website of CalAtlantic, Lennar or any other entity into this joint proxy statement/prospectus. We are providing the information about how you can access documents that are incorporated by reference into this joint proxy statement/prospectus at these websites only for your convenience.

 


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TABLE OF CONTENTS

 

     Page  

QUESTIONS AND ANSWERS

     iv  

SUMMARY

     1  

Information About Lennar (See Page 100)

     1  

Information About CalAtlantic (See Page 103)

     2  

Information About Merger Sub (See Page 105)

     2  

The Merger (See Page 38)

     2  

Terms of the Merger (See Page 79)

     2  

Exchange and Payment Procedures (See Page 80)

     2  

Cash Election (See Page 83)

     3  

Financing Related to the Merger (See Page 83)

     4  

Treatment of Equity Awards (See Page 81)

     4  

Board of Directors and Executive Officers of Lennar After Completion of the Merger (See Page 67)

     6  

CalAtlantic Board Recommendation and Its Reasons for the Merger (See Page 54)

     6  

Opinion of CalAtlantic’s Financial Advisor (See Page 57)

     6  

Interests of CalAtlantic Directors and Executive Officers in the Merger (See Page 68)

     7  

Voting Agreements (See Pages 98, 99)

     7  

Certain U.S. Federal Income Tax Considerations (See Page 75)

     7  

Accounting Treatment of the Merger (See Page 67)

     8  

No Appraisal Rights (See Page 68)

     8  

Regulatory Approvals Required for the Merger (See Page 67)

     8  

Conditions to Completion of the Merger (See Page 84)

     8  

No Solicitation; Notice of Proposals (See Page 90)

     9  

Termination of the Merger Agreement (See Page 94)

     10  

Effect of Termination; Termination Fees; Expense Reimbursement (See Page 96)

     12  

Summary of Risk Factors Related to the Merger (See Page 26)

     13  

Purpose of the CalAtlantic Special Meeting; Required Vote (See Pages 106, 107)

     14  

Ownership of CalAtlantic Shares by CalAtlantic Directors and Executive Officers (See Page 103)

     14  

Purpose of the Lennar Special Meeting; Required Vote (See Page 110)

     15  

Ownership of Lennar Shares by Lennar Directors and Executive Officers (See Page 110)

     15  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF LENNAR

     16  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF CALATLANTIC

     18  

SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

     20  

UNAUDITED COMPARATIVE PER SHARE DATA

     22  

MARKET PRICES AND DIVIDENDS

     24  

RISK FACTORS

     26  

Risks Relating to the Merger

     26  

Risks Regarding an Investment in Lennar

     33  

Risks Relating to the Combined Company Following the Merger

     34  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     36  

THE MERGER

     38  

Background to the Merger

     38  

Lennar Board Recommendation and Its Reasons for Approving the Merger

     53  

CalAtlantic Board Recommendation and Its Reasons for the Merger

     54  

Opinion of CalAtlantic’s Financial Advisor

     57  

Unaudited Prospective Financial Information

     63  

Board of Directors and Executive Officers After Completion of the Merger

     67  

Accounting Treatment of the Merger

     67  

Regulatory Approvals Required for the Merger

     67  

 

i


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Restrictions on Sales of Shares of Lennar Class A and Class  B Common Stock Received in the Merger

     67  

No Appraisal Rights

     68  

NYSE Listing of Lennar Stock; Delisting and Deregistration of CalAtlantic Common Stock

     68  

Interests of CalAtlantic Directors and Executive Officers in the Merger

     68  

Retention Arrangements

     71  

Equity Compensation

     71  

Indemnification; Directors’ and Officers’ Insurance

     71  

Quantification of Potential Payments and Benefits to CalAtlantic’s Named Executive Officers in Connection with the Merger

     72  

CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS

     75  

THE MERGER AGREEMENT

     79  

Terms of the Merger

     79  

Exchange and Payment Procedures

     80  

Treatment of Preferred Share Purchase Rights; Convertible Debt

     80  

Treatment of Equity Awards

     81  

Adjustments; Dividends

     82  

Cash Election

     83  

Financing Related to the Merger

     83  

Governance Matters

     83  

Completion of the Merger

     84  

Conditions to Completion of the Merger

     84  

Representations and Warranties

     85  

Conduct of Business Prior to Closing

     87  

No Solicitation; Notice of Proposals

     90  

Efforts to Obtain Required Stockholder Approvals

     90  

Board Recommendations; Fiduciary Out

     90  

CalAtlantic Cooperation

     92  

Agreement to Take Further Action and to Use Reasonable Best Efforts

     92  

Employee Benefits Matters

     92  

Other Covenants and Agreements

     93  

Termination of the Merger Agreement

     94  

Effect of Termination

     96  

Termination Fees; Expense Reimbursement

     96  

Amendment and Waiver

     97  

Assignment

     97  

Specific Performance

     97  

Governing Law

     97  

MILLER VOTING AGREEMENT

     98  

THE MP CA HOMES VOTING AND CASH ELECTION AGREEMENT

     99  

INFORMATION ABOUT LENNAR

     100  

INFORMATION ABOUT CALATLANTIC

     103  

INFORMATION ABOUT MERGER SUB

     105  

CALATLANTIC SPECIAL MEETING

     106  

Date, Time and Place

     106  

Purpose of the CalAtlantic Special Meeting

     106  

Recommendation of the Board of Directors of CalAtlantic

     106  

CalAtlantic Record Date; Stockholders Entitled to Vote

     106  

Voting by CalAtlantic’s Directors and Executive Officers

     106  

Quorum

     107  

Required Vote

     107  

Failure to Vote, Broker Non-Votes and Abstentions

     107  

 

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Voting at the Special Meeting

     108  

Voting in Person

     108  

Voting by Proxy

     108  

How Proxies are Counted

     108  

Revocation of Proxies

     109  

Tabulation of Votes

     109  

Solicitation of Proxies

     109  

Adjournments

     109  

LENNAR SPECIAL MEETING

     110  

Date, Time and Place

     110  

Purpose of the Meeting

     110  

Quorum

     110  

Required Vote

     110  

Recommendation of Lennar Board of Directors

     111  

Who Can Vote

     111  

Voting of Proxies

     111  

Shares Held in Street Name; Broker Non-Votes

     112  

Revocability of Proxies and Changes to a Stockholder’s Vote

     112  

Voting by Lennar Directors and Executive Officers

     113  

Attending the Lennar Stockholders Meeting

     113  

No Other Business

     113  

CALATLANTIC PROPOSALS

     114  

Item 1. The CalAtlantic Merger Proposal

     114  

Item 2. The CalAtlantic Merger-Related Compensation Proposal

     114  

Item 3. The CalAtlantic Adjournment Proposal

     114  

LENNAR PROPOSALS

     116  

Item 1. The Lennar Merger Proposal

     116  

Item 2. The Lennar Authorized Share Proposal

     116  

Item 3. The Lennar Adjournment Proposal

     117  

Obligation to Reimburse CalAtlantic Expenses

     117  

DESCRIPTION OF LENNAR CAPITAL STOCK

     119  

General

     119  

Description of Common Stock

     119  

Description of Preferred Stock

     120  

Description of Participating Preferred Stock

     121  

Anti-Takeover Effects of Lennar’s Certificate of Incorporation and Bylaws

     121  

Delaware Anti-Takeover Statute

     122  

Transfer Agent and Registrar

     122  

COMPARISON OF RIGHTS OF STOCKHOLDERS OF CALATLANTIC AND LENNAR

     123  

LEGAL MATTERS

     130  

EXPERTS

     131  

DATES FOR SUBMISSION OF STOCKHOLDER PROPOSALS FOR 2018 ANNUAL MEETINGS

     132  

Lennar

     132  

CalAtlantic

     132  

WHERE YOU CAN FIND MORE INFORMATION

     133  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS OF LENNAR AND CALATLANTIC

     F-1  
Annex A—Agreement and Plan of Merger      A-1  
Annex B—Form of Amendment to Certificate of Incorporation of Lennar Corporation      B-1  
Annex C—Opinion of J.P. Morgan Securities LLC      C-1  

 

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QUESTIONS AND ANSWERS

The following questions and answers briefly address some likely questions about Lennar’s and CalAtlantic’s special meetings. Lennar and CalAtlantic stockholders should carefully read this entire joint proxy statement/prospectus, including the annexes and the other documents to which this joint proxy statement/prospectus refers or which it incorporates by reference, because this section does not provide all the information that might be important to you. Also see “Where You Can Find More Information” beginning on page 133.

 

Q: Why am I receiving this joint proxy statement/prospectus?

 

A: CalAtlantic and Lennar have agreed to a business combination pursuant to the terms of the merger agreement that is described in this joint proxy statement/prospectus. A copy of the merger agreement is included in this joint proxy statement/prospectus in Annex A.

In order to complete the Merger, among other things:

 

    CalAtlantic stockholders must approve the adoption of the merger agreement; and

 

    Lennar stockholders must approve the issuance of shares of Lennar’s Class A and Class B common stock in connection with the Merger and might have to approve an amendment to Lennar’s certificate of incorporation increasing the number of shares of Class A common stock that Lennar is authorized to issue.

CalAtlantic and Lennar will hold separate special meetings of their stockholders to obtain these approvals. This joint proxy statement/prospectus, including its annexes, contains and incorporates by reference important information about CalAtlantic and Lennar, the Merger and the stockholders meetings of CalAtlantic and Lennar. You should read all the available information carefully and in its entirety.

 

Q: What will happen in the Merger and what will CalAtlantic stockholders receive in the Merger?

 

A: In the Merger, CalAtlantic will be merged into Merger Sub, a newly formed, wholly-owned subsidiary of Lennar, with Merger Sub surviving as a wholly-owned subsidiary of Lennar. At the effective time of the Merger, each share of CalAtlantic common stock will become the right to receive 0.885 shares of Lennar Class A common stock and 0.0177 shares of Lennar Class B common stock. CalAtlantic stockholders will have the option to receive cash in an amount equal to $48.26 per share of CalAtlantic common stock in lieu of receiving shares of Lennar Class A common stock and Class B common stock in the Merger, subject to proration to the extent cash to be paid to all such holders who elect to receive cash would exceed $1,162,250,000. No fractional shares of Lennar common stock will be issued in the Merger, and CalAtlantic stockholders will instead receive cash in lieu of fractional shares of Lennar common stock. The terms of the merger consideration are described in more detail in the section of this joint proxy statement/prospectus titled “The Merger Agreement—Terms of the Merger” beginning on page 79.

 

Q: Will CalAtlantic stockholders who receive shares of Lennar Class A common stock in the Merger receive a Lennar Class B common stock dividend?

 

A: On October 29, 2017, the Lennar board of directors, which we refer to as the “Lennar board” or “Lennar board of directors,” declared a stock dividend of one share of Class B common stock for each 50 shares of Class A or Class B common stock held by Lennar stockholders, payable on November 27, 2017 to holders of record at the close of business on November 10, 2017, which we refer to as the “Class B dividend.” Pursuant to the merger agreement, to account for the Class B dividend, CalAtlantic stockholders entitled to receive Lennar Class A common stock as consideration in the Merger will also be entitled to receive 0.0177 shares of Lennar Class B common stock for each share of CalAtlantic common stock.

Under the terms of the merger agreement, except for the Class B dividend, Lennar is not permitted to pay any dividends or make any distributions with a record date after the date of the merger agreement and prior

 

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to completion of the Merger, other than regular quarterly cash dividends in amounts consistent with past practice. CalAtlantic stockholders will not be entitled to receive any cash dividends Lennar pays to holders of record on a date prior to the date of the Merger. After the closing of the Merger, as a holder of shares of Lennar common stock, you will receive the same dividends on Lennar shares that all other holders of Lennar shares might receive, provided that the dividend record date is after the Merger is completed.

 

Q: If a CalAtlantic stockholder makes a valid cash election, is that stockholder guaranteed to receive all cash in the Merger?

 

A: No. If a CalAtlantic stockholder elects to receive cash in the Merger, that stockholder is not guaranteed to receive cash for all the shares for which the stockholder makes a valid cash election. Under the merger agreement, the aggregate cash consideration payable in the Merger is capped at $1,162,250,000. If CalAtlantic stockholders elect to receive cash with respect to 24,083,092 or more shares of CalAtlantic common stock, the aggregate cash consideration such stockholders elect to receive would exceed $1,162,250,000, in which case the cash paid to CalAtlantic stockholders who validly elect to receive cash will be prorated so that the total cash that is paid will be $1,162,250,000, with the balance of the merger consideration payable to such stockholders being paid in the form of Lennar Class A and Class B common stock. Accordingly, for example:

 

    if all the CalAtlantic stockholders elect to receive cash, each CalAtlantic stockholder will receive approximately 21.8% of its merger consideration in cash and the remaining 78.2% in the form of Lennar Class A and Class B common stock; and

 

    if holders of 50% of the outstanding CalAtlantic common stock elect to receive cash, each CalAtlantic stockholder who elects to receive cash will receive approximately 43.6% of its merger consideration in cash and the remaining 56.4% in the form of Lennar Class A and Class B common stock, and each CalAtlantic stockholder who does not elect to receive cash will receive its entire merger consideration in the form of Lennar Class A and Class B common stock.

If no CalAtlantic stockholder elects to receive cash, all CalAtlantic stockholders, other than MP CA Homes LLC, which we refer to as “MP CA Homes,” will receive their entire merger consideration in the form of Lennar Class A and Class B common stock, and MP CA Homes, which owns approximately 24.4% of the outstanding CalAtlantic common stock, will be deemed to have elected to receive cash with respect to 24,083,091 of its 28,332,549 shares for an aggregate cash consideration of $1,162,250,000. See “The MP CA Homes Voting and Cash Election Agreement” beginning on page 99 of this joint proxy statement/prospectus.

 

Q: How does a CalAtlantic stockholder make a cash election?

Lennar will cause an election form, which a CalAtlantic stockholder can use to make a cash election, to be sent to each CalAtlantic stockholder of record at least 20 business days before the deadline for electing to receive cash. The deadline for electing to receive cash will be 11:59 p.m., Eastern Time on the fifth business day before the scheduled date of the CalAtlantic special meeting. Lennar will also use commercially reasonable efforts to make the election form available to all persons who become record holders of CalAtlantic common stock after the record date for the mailing described above and prior to the election deadline.

An election will have been validly made only if Lennar’s distribution agent has received, by the election deadline, a validly completed and executed election form (that is not otherwise withdrawn), accompanied by (1) CalAtlantic stock certificates, if any, to which such election form relates, or (2) an agent’s message stating that such shares of CalAtlantic common stock have been transferred by book entry transfer to an account established by Lennar’s distribution agent for the purpose of receiving shares of CalAtlantic common stock. After the election deadline, cash elections will be irrevocable. For more information regarding the procedures for electing to receive cash, see the section titled, “The Merger Agreement—Cash Election” on page 83 of this joint proxy statement/prospectus.

 

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Q: Can CalAtlantic stockholders change or revoke their cash elections once they have mailed their signed cash election forms?

 

A: Yes. CalAtlantic stockholders can change or revoke their cash elections in writing at any time prior to the deadline for making cash elections, which will be 11:59 p.m., Eastern Time on the fifth business day before the scheduled date of the CalAtlantic special meeting. After such date, CalAtlantic stockholders cannot change or revoke their cash elections.

 

Q: What happens if a CalAtlantic stockholder does not submit a validly completed cash election form and related materials or they are not received by Lennar’s distribution agent before the election deadline?

 

A: For any shares of CalAtlantic common stock with respect to which the distribution agent does not receive a validly completed and timely election form and any related materials, the holder of those shares will be deemed not to have made a valid cash election. Under the merger agreement, the holders of such shares will receive shares of Lennar common stock in the Merger.

 

Q: What happens if the market price of shares of Lennar common stock or CalAtlantic common stock changes before the closing of the Merger?

 

A: No change will be made to the ratio of 0.885 shares of Class A common stock and 0.0177 shares of Class B common stock per share of CalAtlantic common stock, which is referred to as the “exchange ratio,” if the market price of shares of Lennar Class A or Class B common stock or CalAtlantic common stock changes before the Merger. Because the exchange ratio is fixed, the value of the stock consideration to be received in the Merger will fluctuate between the date of this joint proxy statement/prospectus and the completion of the Merger based upon the market value of Lennar’s Class A and Class B common stock. However, the value of the stock consideration to be received in the Merger will not be affected by fluctuations in the market price of CalAtlantic’s common stock.

 

Q: What is the market value of the Lennar stock that CalAtlantic stockholders will receive in the Merger?

 

A: The exact value of the shares of Lennar stock that CalAtlantic stockholders will receive in the Merger will depend on the price of shares of Lennar Class A and Class B common stock at the effective time of the Merger. The price at the effective time of the Merger will not be known at the deadline for submitting a cash election form, or at the time of the CalAtlantic special meeting. Based on the closing price of Lennar’s stock on the NYSE on October 27, 2017, the last full trading day before the public announcement of the Merger, of $58.01 for its Class A common stock, 0.885 shares of Lennar Class A common stock had a value of $51.34. Based on the closing price of Lennar’s stock on the NYSE on January 2, 2018, the latest practicable trading day before the date of this joint proxy statement/prospectus, of $64.84 for its Class A common stock and $52.61 for its Class B common stock, 0.885 shares of Lennar Class A common stock had a value of $57.38 and 0.0177 shares of Lennar Class B common stock had a value of $0.93. We urge you to obtain current market quotations for Lennar’s Class A and Class B common stock when you are ready to make a decision on whether or not to make a cash election and your voting decision.

 

Q: How will Lennar stockholders be affected by the Merger and the issuance of shares of Lennar Class A and Class B common stock to CalAtlantic stockholders in the Merger?

 

A:

After the Merger, each Lennar stockholder will continue to hold the same number of shares of Lennar common stock of each class that the Lennar stockholder held immediately prior to the Merger. However, because Lennar will be issuing shares of Class A and Class B common stock to CalAtlantic stockholders in the Merger, each share of Lennar stock that is outstanding immediately prior to the Merger will, after the

 

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  Merger, represent a smaller percentage of the combined company’s stock than it did of Lennar’s stock before the Merger. Upon the completion of the Merger, based on the number of shares of Lennar Class A and Class B common stock and CalAtlantic common stock outstanding as of January 2, 2018, the latest practicable trading day before the date of this joint proxy statement/prospectus, continuing Lennar Class A stockholders and Class B stockholders together will own approximately 74% of the outstanding stock of the combined company, and former CalAtlantic stockholders will own approximately 26% of the outstanding stock of the combined company, assuming CalAtlantic stockholders will elect or will be deemed to elect to receive cash with regard to the number of shares that will cause the total cash consideration paid by Lennar in the Merger to be $1,162,250,000.

 

Q: What am I being asked to vote on and why is this approval necessary?

 

A: CalAtlantic. CalAtlantic stockholders are being asked to vote on the following proposals:

 

    CalAtlantic Merger Proposal : To consider and vote on the proposal to adopt the merger agreement, a copy of which is included as Annex A to this joint proxy statement/prospectus;

 

    CalAtlantic Merger-Related Compensation Proposal : To consider and vote on the proposal to approve, on an advisory (non-binding) basis, specified compensatory arrangements between CalAtlantic and its named executive officers relating to the proposed Merger, as described in this joint proxy statement/prospectus; and

 

    CalAtlantic Adjournment Proposal : To vote upon one or more proposals to adjourn the CalAtlantic special meeting, if necessary or appropriate, including any adjournment to solicit additional proxies if there are not sufficient votes to approve the foregoing proposals.

CalAtlantic stockholders will also be asked to transact such other business as may validly come before the special meeting and any postponement or adjournment thereof. Approval of the CalAtlantic Merger Proposal by CalAtlantic stockholders is required for completion of the Merger.

Lennar. Lennar stockholders are being asked to consider and vote on the following proposals:

 

    Lennar Merger Proposal: A proposal to approve the issuance of shares of Lennar’s Class A and Class B common stock in connection with the Merger as contemplated by the merger agreement;

 

    Lennar Authorized Share Proposal : A proposal to approve an amendment to Lennar’s Certificate of Incorporation increasing the number of shares of Class A common stock that Lennar is authorized to issue from 300,000,000 shares to 400,000,000 shares; and

 

    Lennar Adjournment Proposal : A proposal to approve the adjournment of the Lennar special meeting, if necessary in order to enable Lennar to solicit additional votes, if at the time of the stockholders meeting there are not sufficient votes to approve the Lennar Merger Proposal and the Lennar Authorized Share Proposal.

Approval of the Lennar Merger Proposal by Lennar is required for completion of the Merger. It is very likely that Lennar will be able to complete the Merger without approval of the Lennar Authorized Share Proposal. If the number of shares of Class A common stock that Lennar is required to issue in the Merger exceeds the number of shares of Class A common stock that Lennar currently is authorized to issue (which would be the case if no CalAtlantic stockholders exercise the cash election option under the merger agreement), approval of the Lennar Authorized Share Proposal would be required for completion of the Merger. However, there is an agreement with a major CalAtlantic stockholder assuring that the cash election will be exercised with respect to the maximum number of shares as to which it can be exercised, and therefore Lennar should be able to complete the Merger even if the Lennar Authorized Share Proposal is not approved. See “The MP CA Homes Voting and Cash Election Agreement.” If Lennar will have enough authorized shares of Class A common stock to complete the Merger even if the Lennar Authorized Share Proposal is not approved, Lennar will complete the Merger whether or not the Lennar Authorized Share Proposal is approved.

 

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Q: What vote is required to approve each proposal at the CalAtlantic special meeting?

 

A: CalAtlantic Merger Proposal : The affirmative vote of holders of a majority of the outstanding shares of CalAtlantic common stock entitled to vote on the proposal.

CalAtlantic Merger-Related Compensation Proposal : The affirmative vote of holders of a majority in voting interest of the CalAtlantic stockholders present in person or represented by proxy at the CalAtlantic special meeting at which quorum is present and entitled to vote on the proposal, although such vote will not be binding on CalAtlantic or its board of directors or any of its committees.

CalAtlantic Adjournment Proposal : The affirmative vote of holders of a majority in voting interest of the CalAtlantic stockholders present in person or represented by proxy at the CalAtlantic special meeting and entitled to vote on the proposal.

 

Q: What vote is required to approve each proposal at the Lennar special meeting?

 

A: Lennar Merger Proposal : The affirmative vote of the holders of a majority in voting power of the shares of Lennar Class A common stock and Class B common stock that are voted with regard to the proposal at the Lennar special meeting at which a quorum is present (treating abstentions as votes against), voting together as though they were a single class.

Lennar Authorized Share Proposal : The affirmative vote of both (i) the holders of a majority in voting power of the outstanding shares of Lennar Class A common stock and Class B common stock, voting together as though they were a single class, and (ii) the holders of a majority of the shares of Lennar Class A common stock that are voted with regard to the proposal at the Lennar special meeting, in each case, at which a quorum is present.

Lennar Adjournment Proposal : The affirmative vote of the holders of a majority in voting power of the shares of Lennar Class A common stock and Class B common stock that are voted with regard to the proposal, voting together as though they were a single class.

 

Q: Who is entitled to vote at the special stockholders meetings?

 

A: CalAtlantic . The record date for the CalAtlantic special meeting is January 4, 2018. Only holders of record of outstanding shares of CalAtlantic’s common stock as of the close of business on the record date are entitled to notice of, and to vote at, the CalAtlantic special meeting or any adjournment or postponement of the CalAtlantic special meeting.

Lennar . The record date for the Lennar special meeting is January 4, 2018. Only holders of record of outstanding shares of Lennar’s Class A and Class B common stock as of the close of business on the record date are entitled to notice of, and to vote at, the Lennar special meeting or any adjournment or postponement of the Lennar special meeting.

 

Q: How is voting power determined?

 

A: CalAtlantic. Holders of CalAtlantic common stock are entitled to one vote for each share owned as of the close of business on the CalAtlantic record date. As of the close of business on the CalAtlantic record date, there were 116,190,785 shares of CalAtlantic common stock outstanding and entitled to vote at the CalAtlantic special meeting.

Lennar. Holders of Lennar Class A common stock are entitled to one vote for each share owned as of the close of business on the Lennar record date with regard to all matters. Holders of Lennar Class B common stock are entitled to 10 votes for each share owned as of the close of business on the Lennar record date with regard to all matters as to which they are entitled to vote. As of the close of business on the Lennar record date, there were 203,952,285 shares of Lennar Class A common stock and 36,007,774 shares of Lennar Class B common stock outstanding and entitled to vote at the Lennar special meeting.

 

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Q: What constitutes a quorum?

 

A: CalAtlantic. Stockholders who are record holders of shares representing at least a majority in voting interest of the shares of CalAtlantic common stock entitled to vote at the CalAtlantic special meeting must be present in person or represented by proxy to constitute a quorum for the transaction of business at the CalAtlantic special meeting. Abstentions will be included in the calculation of the number of shares of CalAtlantic common stock represented at the special meeting for purposes of determining whether a quorum has been achieved. However, failures to vote and broker non-votes will not be included in the calculation of the number of shares of CalAtlantic common stock represented at the special meeting for purposes of determining whether a quorum has been achieved.

Lennar . The presence in person or by proxy of holders of a majority in voting power, and not less than one-third in number, of the shares entitled to vote at the Lennar stockholders meeting will be necessary, and will constitute a quorum, for the transaction of business at that meeting. Shares that are present but abstain from voting will be treated as present for the purposes of determining whether a quorum exists, even though they will not be voted (except that they will be treated as negative votes with regard to the Lennar Merger Proposal). Any shares that are not able to be voted, such as shares held by brokers or other fiduciaries who do not receive necessary voting instructions from beneficial owners (so-called broker non-votes) will not be counted as present for purposes of the quorum determination.

 

Q: How does the CalAtlantic board of directors recommend that I vote?

 

A: The CalAtlantic board of directors, which we refer to as the “CalAtlantic board” or the “CalAtlantic board of directors,” unanimously recommends that CalAtlantic stockholders vote “ FOR ” the CalAtlantic Merger Proposal, “ FOR ” the CalAtlantic Merger-Related Compensation Proposal and “ FOR ” the CalAtlantic Adjournment Proposal, if necessary.

 

Q: How does the Lennar board of directors recommend that I vote?

 

A: The Lennar board of directors unanimously recommends that Lennar stockholders vote “ FOR ” the Lennar Merger Proposal, “ FOR ” the Lennar Authorized Share Proposal and “ FOR ” the Lennar Adjournment Proposal, if necessary.

 

Q: When do Lennar and CalAtlantic expect to complete the Merger?

 

A: The Merger is expected to take place in the first quarter of 2018. However, it is possible the Merger will be delayed because of conditions beyond the control of either CalAtlantic or Lennar. See “The Merger Agreement—Conditions to Completion of the Merger” beginning on page 84.

 

Q: What will happen if the Merger is not completed?

 

A:

If CalAtlantic or Lennar does not receive the requisite stockholder votes or if the Merger is not completed for any other reason, CalAtlantic stockholders will not receive any merger consideration and will continue to hold shares of CalAtlantic common stock. If the merger agreement is terminated because the CalAtlantic board of directors withdraws or negatively modifies its recommendation that CalAtlantic stockholders give the approval that is necessary for the Merger to take place, or if it is terminated by CalAtlantic in order to accept what its board of directors determines to be a superior proposal that Lennar will not at least match, CalAtlantic will be required to pay Lennar a termination fee of $178.7 million. Similarly, if the merger agreement is terminated because the Lennar board of directors withdraws or negatively modifies its recommendation that Lennar stockholders give the approval or approvals that are necessary for the Merger to take place, Lennar will be required to pay CalAtlantic a termination fee of $178.7 million. If the Merger does not take place because the stockholders of either CalAtlantic or Lennar fail to give the necessary stockholder approvals, the company whose stockholders do not give the necessary stockholder approvals

 

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  will have to reimburse the other company for its Merger related expenses up to $30.0 million. See “The Merger Agreement—Effect of Termination” and “—Termination Fees; Expense Reimbursement” beginning on pages 96, respectively.

 

Q: What do I need to do now? Do I need to do anything with my shares of common stock other than voting for the proposals at the special meeting and submitting a cash election form, if applicable?

 

A: After carefully reading and considering the information contained in this joint proxy statement/prospectus, please submit a proxy or voting instructions for your shares by following the instructions set forth on the proxy card or on the voting instruction form provided by the record holder if your shares are held in the name of your broker, bank or other nominee.

If you are a CalAtlantic stockholder who does not make a valid cash election, shortly after the effective time of the Merger, you will receive instructions regarding submitting your CalAtlantic shares in order to receive the Lennar Class A and Class B common stock to which you are entitled as a result of the Merger. Please do not send your CalAtlantic stock certificates with your proxy card.

 

Q: How do I vote?

 

A: If you are a stockholder of record of CalAtlantic as of January 4, 2018 or if you are a stockholder of record of Lennar as of January 4, 2018, you may vote by proxy before the CalAtlantic or Lennar special meeting, as applicable, in one of the following ways:

 

    By Telephone : By dialing the toll-free number specified on the proxy card and following the instructions on the proxy card;

 

    Via the Internet : By accessing the website specified on the proxy card and following the instructions on the proxy card; or

 

    By Mail : By completing and returning the proxy card in the enclosed envelope. The envelope requires no additional postage if mailed in the United States.

You may also cast your vote in person at the CalAtlantic or Lennar special meeting, as applicable.

If your shares are held in “street name” through a broker or other nominee, that institution will send you separate instructions describing the procedure that you must follow in order to have your shares voted.

 

Q: When and where will the special stockholders meetings be held?

 

A: CalAtlantic. The CalAtlantic special meeting will be held at CalAtlantic’s primary California office at 15360 Barranca Parkway, Irvine, CA 92618, on February 12, 2018 at 9:30 a.m., Pacific time.

Lennar. The Lennar special meeting will be held at Lennar’s offices at 700 Northwest 107 th Avenue, Miami, Florida 33172 on February 12, 2018 at 11:00 a.m., Eastern time.

 

Q: If my shares are held in “street name” by a broker, bank or other nominee, will my broker, bank or other nominee vote my shares for me?

 

A: Not unless you instruct them to do so. If your shares are held in “street name” in a stock brokerage account or by a bank or other nominee, you are considered the “beneficial holder” of the shares held for you in what is known as “street name.” You are not the “record holder” of such shares. If this is the case, this joint proxy statement/prospectus has been forwarded to you by your broker, bank or other nominee. As the beneficial holder, you must provide the record holder of your shares with instructions on how to vote your shares. Your broker, bank or other nominee should provide you with instructions as to how to do this.

Please note that you may not vote shares held in street name by returning a proxy card directly to CalAtlantic or Lennar, as applicable, or by voting in person at the CalAtlantic special meeting or the Lennar

 

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special meeting, as applicable, unless you provide a “legal proxy” from your broker, bank or other nominee that authorizes you to vote.

If you do not provide voting instructions to your broker or other nominee, your shares will not be voted on any proposal on which your broker or other nominee does not have discretionary authority to vote. In this joint proxy statement/prospectus, we refer to a failure of a broker or other nominee to vote shares because it did not receive a voting instruction from the beneficial owner of the shares as a “broker non-vote.” Under the current NYSE rules, brokers do not have discretionary authority to vote on any of the proposals that will be voted on at the CalAtlantic or Lennar special meeting. A broker non-vote of a share of CalAtlantic common stock will have the same effect as a vote “ AGAINST ” the CalAtlantic Merger Proposal; it will have no effect on the outcome of the vote on the CalAtlantic Merger-Related Compensation Proposal and the CalAtlantic Adjournment Proposal. A broker non-vote of a share of Lennar stock will have the same effect as a vote “ AGAINST ” the Lennar Authorized Share Proposal with respect to the combined vote of the Class A and Class B common stock; it will have no effect on the outcome of the vote on the Lennar Merger Proposal, the Lennar Authorized Share Proposal with respect to the separate vote of holders of Class A common stock, or the Lennar Adjournment Proposal.

 

Q: What happens if I abstain from voting with regard to a proposal?

 

A: For purposes of the CalAtlantic or Lennar special meeting, an abstention occurs when a stockholder who has not submitted a proxy attends the special meeting in person but does not vote or a stockholder returns a proxy marked with an “abstain” designation. Please note that a proxy that is signed and returned but is not marked as to how it should be voted will be voted “ FOR ” the proposals that are voted upon at the applicable special meeting of stockholders.

CalAtlantic . If you are a CalAtlantic stockholder and you abstain from voting, that will have the same effect as a vote “ AGAINST ” the CalAtlantic Merger Proposal, the CalAtlantic Merger-Related Compensation Proposal and the CalAtlantic Adjournment Proposal.

Lenna r. If you are a Lennar stockholder and you abstain from voting, that will have the same effect as a vote “ AGAINST ” the Lennar Merger Proposal and the Lennar Authorized Share Proposal with respect to the combined vote of the Class A and Class B common stock; it will have no effect on the outcome of the vote on the Lennar Authorized Share Proposal with respect to the separate vote of holders of Lennar’s Class A common stock and no effect on the outcome of the vote on the Lennar Adjournment Proposal.

 

Q: What will happen if I return my proxy card without indicating how to vote?

 

A: If you validly complete, sign and return your proxy card without indicating how to vote on any particular proposal, the CalAtlantic common stock or the Lennar Class A or Class B common stock represented by your proxy will be voted as recommended by the CalAtlantic board or the Lennar board, as the case may be, with respect to that proposal. That means that a signed proxy card that does not indicate how to vote will be voted “ FOR ” all the proposals.

 

Q: May I change or revoke my proxy after I have delivered it?

 

A: Yes. You may revoke or change your proxy with regard to a matter any time before the matter is voted upon at the CalAtlantic or Lennar special meeting. You can do this by:

 

    sending a written notice, which is received prior to your vote being cast with regard to the matter, if the matter will be voted upon at the CalAtlantic special meeting, to CalAtlantic Group, Inc., 15360 Barranca Parkway, Irvine, California 92618, Attention: Corporate Secretary, or if the matter will be voted upon at the Lennar special meeting, to Lennar Corporation, 700 Northwest 107 th Avenue, Miami, Florida 33172, Attention: Corporate Secretary, in each case that bears a date later than the date of the prior proxy and states that you revoke your prior proxy with regard to the specified matter (or in its entirety);

 

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    submitting a valid, later-dated proxy by mail, telephone or via the Internet that is received prior to your vote being cast with regard to the matter at the CalAtlantic or Lennar special meeting, as the case may be (provided that any such submission must comply with the applicable instructions, including any cut-off times for when proxies can be submitted via the Internet); or

 

    attending the CalAtlantic or Lennar special meeting, as the case may be, and voting by ballot in person with regard to the matter. Your attendance at the CalAtlantic or Lennar special meeting, as the case may be, will not, by itself, revoke any proxy that you have previously given.

If you hold your shares of CalAtlantic common stock or Lennar stock through a broker or other nominee, you must follow the directions you receive from your broker or other nominee in order to revoke or change your voting instructions.

 

Q: What if I hold shares of capital stock in both CalAtlantic and Lennar?

 

A: If you are a stockholder of both CalAtlantic and Lennar, you will receive two separate packages of proxy materials. A vote cast as a CalAtlantic stockholder will not count as a vote cast as a Lennar stockholder, and a vote cast as a Lennar stockholder will not count as a vote cast as a CalAtlantic stockholder. Therefore, please separately submit a proxy for each of your CalAtlantic and Lennar shares.

 

Q: Where can I find the voting results of the CalAtlantic or Lennar special meeting?

 

A: The preliminary voting results will be announced at each of the CalAtlantic special meeting and Lennar special meeting. In addition, within four business days after the date of the special meeting, each of CalAtlantic and Lennar intends to report the final voting results in a Current Report on Form 8-K filed with the SEC.

 

Q: What happens if I sell my shares of CalAtlantic common stock or Lennar stock after the record date but before the CalAtlantic or Lennar special meeting, as the case may be?

 

A: The record date for the CalAtlantic special meeting is earlier than the date of the CalAtlantic special meeting and the record date for the Lennar special meeting is earlier than the date of the Lennar special meeting, and, in each case, earlier than the date that the Merger is expected to be completed. If you sell or otherwise transfer your shares of CalAtlantic common stock or Lennar stock after the applicable record date but before the date of the applicable special meeting, you will retain your right to vote at that special meeting. However, if you are a CalAtlantic stockholder, you will not have the right to receive the merger consideration to be received by CalAtlantic stockholders in the Merger. In order to receive the merger consideration, you must hold your shares of CalAtlantic common stock at the time of the completion of the Merger.

 

Q: What does it mean if I receive more than one proxy card or vote instruction card?

 

A: Your receipt of more than one proxy card or vote instruction card may mean that you have multiple accounts with CalAtlantic’s or Lennar’s transfer agent or with a brokerage firm, bank or other nominee. If you vote by mail, you will need to sign and return all the proxy cards or vote instruction cards to cause all of your shares of CalAtlantic common stock or Lennar Class A or Class B common stock, as applicable, to be voted. Each proxy card or vote instruction card relates to a distinct number of shares of CalAtlantic common stock or Lennar Class A or Class B common stock, and it is the only means by which those particular shares of CalAtlantic stock or Lennar stock can be voted by mail.

 

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Q: What are the tax consequences of the Merger?

 

A: The Merger is intended to qualify as a reorganization pursuant to section 368(a) of the Code and, in connection with the filing of the registration statement of which this joint proxy statement/prospectus is a part, CalAtlantic has received an opinion from tax counsel concluding that it will so qualify. Based on that opinion, in the Merger, a CalAtlantic stockholder generally:

 

    will not recognize gain or loss as a result of receiving solely Lennar common stock as merger consideration;

 

    will recognize gain (but not loss) as a result of receiving partly cash and partly Lennar common stock with respect to the holder’s CalAtlantic common stock in an amount equal to the lesser of (i) any gain realized with respect to that stock or (ii) the amount of any cash received with respect to that stock (other than any cash received in lieu of a fractional share of Lennar common stock);

 

    will recognize gain or loss as a result of receiving cash with respect to all the holder’s CalAtlantic common stock in an amount equal to the difference between the holder’s basis in the CalAtlantic common stock and the total amount of cash received as a result of the Merger; and

 

    will recognize gain (or loss) to the extent any cash received in lieu of a fractional share of Lennar common stock exceeds (or is less than) the basis of the fractional share.

Tax matters are very complicated, and the tax consequences of the Merger to a particular CalAtlantic stockholder will depend on that stockholder’s circumstances. Accordingly, CalAtlantic and Lennar urge you to consult your tax advisor regarding the tax consequences of the Merger to you, including the applicability and effect of U.S. federal, state, local, and foreign income and other tax laws. For a more complete discussion of the material U.S. federal income tax consequences of the Merger, see “Certain U.S. Federal Income Tax Considerations” beginning on page 75.

 

Q: Am I entitled to dissenter or appraisal rights?

 

A: No. Appraisal rights are statutory rights that, if applicable, enable stockholders to dissent from an extraordinary transaction, such as a merger, and demand that the corporation pay the fair value for their shares as determined by a court in a judicial proceeding instead of receiving the consideration being paid or issued in connection with that extraordinary transaction. Appraisal rights are not available in all circumstances, and exceptions to these rights are provided under the General Corporation Law of the State of Delaware, which we refer to as the “DGCL.” In the Merger, because CalAtlantic stockholders are not required to accept in the Merger any consideration in exchange for their shares of CalAtlantic common stock other than Lennar Class A common stock and Class B common stock, both of which are listed on the NYSE, and cash in lieu of fractional shares (if applicable), holders of CalAtlantic common stock will not be entitled to appraisal rights in connection with the Merger with respect to their shares of CalAtlantic common stock. For a more detailed description of the relevant provisions of the DGCL, see the section entitled “The Merger—No Appraisal Rights” beginning on page 68.

 

Q: Whom should I contact if I have any questions about the proxy materials or voting?

 

A: If you have any questions about the Merger or the other matters to be voted upon at the CalAtlantic or Lennar special meeting, or if you need assistance submitting your proxy or voting your shares or need additional copies of this joint proxy statement/prospectus or the enclosed proxy card, you should contact Georgeson LLC, CalAtlantic’s proxy solicitor, toll-free at (877) 507-1756, if you are a CalAtlantic stockholder, or MacKenzie Partners, Inc., Lennar’s proxy solicitor, toll-free at (800) 322-2885 (banks and brokers call collect at (212) 929-5500), if you are a Lennar stockholder.

 

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SUMMARY

This summary highlights selected information contained in this joint proxy statement/prospectus and does not contain all the information that may be important to you. Lennar and CalAtlantic urge you to read this joint proxy statement/prospectus carefully in its entirety, including the annexes. Additionally, important information, which Lennar and CalAtlantic also urge you to read, is contained in the documents incorporated by reference into this joint proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 133. Unless the context indicates otherwise, all references in this joint proxy statement/prospectus to Lennar are to Lennar Corporation and its subsidiaries, all references to CalAtlantic are to CalAtlantic Group, Inc. and its subsidiaries, and all references to the merger agreement are to the Agreement and Plan of Merger, dated as of October 29, 2017, by and among Lennar Corporation, Cheetah Cub Group Corp. and CalAtlantic Group, Inc., a copy of which is attached as Annex A to this joint proxy statement/prospectus.

Information About Lennar (See Page 100)

Lennar is one of the nation’s largest homebuilders, a provider of real estate related financial services, a commercial real estate investment, investment management and finance company through its Rialto segment and a developer of multifamily rental properties in select U.S. markets primarily through the participation of its Multifamily segment in joint ventures and other unconsolidated entities.

Lennar’s homebuilding operations include the construction and sale of single-family attached and detached homes, as well as the purchase, development and sale of residential land directly and through unconsolidated entities in which it has investments. Lennar conducts its homebuilding activities in various states, with its largest homebuilding operations being in Florida, Texas and California. During the nine months ended August 31, 2017, Lennar delivered 20,761 homes and recorded total revenues from sales of those homes of $7.74 billion.

Lennar also provides mortgage financing, title insurance and closing services for both buyers of its homes and others, and it has a real estate brokerage business in Florida. Substantially all of the residential mortgage loans that Lennar originates are sold within a short period in the secondary mortgage market on a servicing released, non-recourse basis. After the loans are sold, Lennar retains potential liability for possible claims by purchasers that it breached limited industry-standard representations and warranties in the loan sale agreements. Lennar’s financial services segment operates in almost all the states in which Lennar conducts homebuilding operations, as well as in other states.

Lennar’s Rialto segment engages in commercial real estate investment, investment management, and mortgage finance. Rialto’s primary focuses are managing third-party capital and originating commercial mortgage loans and selling them into securitizations. It also has invested its own capital in mortgage loans, properties and real estate related securities. Rialto currently is the sponsor of, manages and has investments in six investment funds that invest in real estate related assets.

Lennar’s Multifamily segment is actively involved, primarily through joint ventures and other unconsolidated entities, in the development, construction and property management of multifamily rental properties. It is focused on developing a geographically diversified portfolio of institutional quality multifamily rental properties in select U.S. markets.

Lennar also owns a substantial minority interest in Five Point Holdings, LLC and its subsidiary, Five Point Operating Company, LLC, which are engaged in three major master planned mixed use developments in California.

Lennar’s principal offices are located at 700 Northwest 107th Avenue, Miami, Florida 33172. Its principal telephone number at that address is (305) 559-4000.

 



 

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Lennar has two classes of common stock, Class A common stock and Class B common stock. Both classes are listed on the NYSE, with the symbols LEN and LEN.B, respectively. The two classes are substantially identical in all respects, except that the holders of the Class A common stock, which we refer to as the “Lennar Class A stockholders,” are entitled to one vote per share and the holders of the Class B common stock, which we refer to as the “Lennar Class B stockholders,” and together with the Lennar Class A stockholders, the “Lennar stockholders,” are entitled to 10 votes per share. The trading price of the Class A common stock usually is higher than the trading price of the Class B common stock. Based on the outstanding shares of Lennar and CalAtlantic stock on January 4, 2018, the Lennar shares that are issued to CalAtlantic stockholders in the Merger will constitute approximately 26% of the Lennar shares of both classes that will be outstanding immediately following the Merger.

Information About CalAtlantic (See Page 103)

CalAtlantic Group, Inc., a Delaware corporation, is headquartered in Arlington, Virginia. CalAtlantic builds homes across the homebuilding spectrum, from entry level to luxury, in over 40 metropolitan statistical areas spanning 17 states. Also providing mortgage, title and escrow services, CalAtlantic is focused on providing an exceptional end-to-end home buying experience for its customers.

CalAtlantic’s executive offices are located at 1100 Wilson Boulevard, #2100, Arlington, Virginia 22209 and its telephone number is (240) 532-3806. Shares of CalAtlantic common stock are listed on the NYSE and trade under the symbol “CAA.”

This joint proxy statement/prospectus incorporates important business and financial information about CalAtlantic from other documents that are incorporated by reference; see the section entitled “Where You Can Find More Information” beginning on page 133.

Information About Merger Sub (See Page 105)

Cheetah Cub Group Corp., a wholly-owned subsidiary of Lennar, is a Delaware corporation formed for the purpose of being a party to the Merger. In the Merger, CalAtlantic will merge with and into Merger Sub, with Merger Sub continuing as the surviving entity and continuing to be a wholly-owned subsidiary of Lennar. Merger Sub has not conducted any activities other than those incidental to its formation and the matters contemplated by the merger agreement.

The Merger (See Page 38)

Subject to the terms and conditions in the merger agreement, in the Merger, CalAtlantic will be merged with and into Merger Sub, which is the entity that will survive the Merger and will succeed to all the assets and liabilities, and all the rights and privileges, of CalAtlantic, will be renamed “CalAtlantic Group, Inc.” as a result of the Merger.

Terms of the Merger; Exchange and Payment Procedures (See Page 79, 80)

In the Merger, each share of CalAtlantic common stock that is issued and outstanding immediately prior to the effective time of the Merger (other than shares of CalAtlantic common stock held in the treasury of CalAtlantic or held by any direct or indirect wholly-owned subsidiary of CalAtlantic, and shares of CalAtlantic common stock held by Lennar or Merger Sub, immediately prior to the effective time of the Merger) will automatically be converted into the right to receive 0.885 shares of Class A common stock of Lennar and 0.0177 shares of Class B common stock of Lennar. CalAtlantic stockholders will have the option to elect to receive $48.26 per share in cash, without interest, for each share of CalAtlantic common stock in lieu of receiving Lennar

 



 

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Class A and Class B common stock, subject to a maximum cash amount described below under “—Cash Election.” Any shares of CalAtlantic common stock owned directly or indirectly by CalAtlantic, Lennar or Merger Sub immediately prior to the effective time of the Merger (other than those held in a fiduciary capacity) will be cancelled and the holders of those shares will receive no merger consideration. No fractional shares of Lennar common stock will be issued in connection with the Merger. CalAtlantic stockholders will receive, in lieu of fractional shares of Lennar common stock, cash equal to the applicable fraction of the market value of a full share of the applicable Lennar common stock (based on the last sale price reported on the NYSE) on the last trading day before the date on which the Merger is effective. For a more complete description of the merger consideration, see “The Merger Agreement—Terms of the Merger” beginning on page 79.

Promptly after the effective time of the Merger (but in no event later than two business days after the date on which the effective time occurs), the distribution agent appointed by Lennar will mail or arrange for the electronic delivery to CalAtlantic stockholders of a letter of transmittal and instructions for use in effecting the surrender of CalAtlantic common stock (including stock certificates with regard to any stock held in certificated form) in order to receive Lennar stock as a result of the Merger. Not more than two business days after the date on which the effective time of the Merger occurs, Lennar will deliver the cash consideration to the distribution agent, and the distribution agent will promptly thereafter distribute the cash consideration to the holders of CalAtlantic common stock entitled to receive the cash consideration.

Cash Election (See Page 83)

Each person who is a record owner of CalAtlantic common stock at any time between the date of this joint proxy statement/prospectus and the fifth business day before the scheduled date of the CalAtlantic stockholders meeting will have the option to elect to receive $48.26 per CalAtlantic share in cash instead of Lennar Class A and Class B common stock with regard to some or all of the person’s CalAtlantic common stock. The number of CalAtlantic shares with regard to which Lennar will pay cash to a CalAtlantic stockholder who makes a cash election will be subject to proration to the extent the total amount of cash that Lennar would have to pay for all the CalAtlantic shares that are the subject of cash elections would exceed $1,162,250,000 ( i.e. , to the extent cash elections are made with regard to more than 24,083,091 shares of CalAtlantic’s common stock). MP CA Homes has agreed that if CalAtlantic stockholders (which may include MP CA Homes) do not elect to receive cash consideration with respect to the maximum number of shares as to which Lennar has agreed to pay cash, MP CA Homes will be deemed to have made a cash election with regard to the number of its CalAtlantic shares that would cause cash elections to be made with regard to that maximum number of CalAtlantic shares. For a more complete description of the MP CA Homes voting and cash election agreement, see “The MP CA Homes Voting and Cash Election Agreement—Provision Relating to Cash Election” beginning on page 99.

Lennar will cause the distribution agent to transmit a cash election form to each holder of record of CalAtlantic common stock as of the most recent practicable date prior to such mailing which will enable a record holder to specify the number of shares of CalAtlantic common stock, if any, as to which the record holder elects to exercise the cash election option. In order to properly exercise the cash election option, a record holder of CalAtlantic common stock must timely return a completed and signed cash election form, together with the stock certificate evidencing the shares of CalAtlantic common stock as to which the cash election option is being exercised or an agent’s message stating that such shares of common stock have been transferred by book entry transfer to an account established by the distribution agent. YOU WILL NOT BE ENTITLED TO PARTICIPATE IN THE CASH ELECTION UNLESS YOU PROPERLY COMPLETE AND RETURN, AND DO NOT WITHDRAW, A CASH ELECTION FORM IN ACCORDANCE WITH THE PROCEDURES SET FORTH IN THE MERGER AGREEMENT AND IN THE CASH ELECTION FORM. YOU WILL RECEIVE LENNAR COMMON STOCK AS MERGER CONSIDERATION WITH RESPECT TO EACH SHARE OF CALATLANTIC STOCK FOR WHICH YOU DO NOT MAKE A VALID CASH ELECTION. A HOLDER OF SHARES OF CALATLANTIC COMMON STOCK WILL HAVE THE RIGHT TO CHANGE OR

 



 

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WITHDRAW A CASH ELECTION AT ANY TIME BEFORE THE ELECTION DEADLINE, BUT NOT AFTER THE ELECTION DEADLINE, IN ACCORDANCE WITH PROCEDURES SET FORTH IN THE CASH ELECTION FORM. IF THE MERGER AGREEMENT IS TERMINATED WITHOUT THE MERGER TAKING PLACE, ALL CASH ELECTIONS WILL AUTOMATICALLY BE DEEMED REVOKED.

Financing Related to the Merger (See Page 83)

Although the Merger is not conditioned upon Lennar having received any financing, in anticipation of the payments Lennar will be making as a result of exercises of the cash election option, Lennar sold $300 million of 2.95% Senior Notes due 2020 and $900 million of 4.75% Senior Notes due 2027, in a private offering, which we refer to as the “Senior Notes Offering” that closed on November 29, 2017. Lennar intends to use the net proceeds from the Senior Notes Offering to fund the cash consideration payable to CalAtlantic stockholders who elect to receive cash in the Merger, to pay expenses related to the Merger and for general corporate purposes.

Treatment of CalAtlantic Equity Awards (See Page 81)

Treatment of Stock Options

At the effective time of the Merger, each outstanding option to purchase shares of CalAtlantic common stock will automatically convert into an option to acquire Lennar Class A and Class B common stock on the same terms and conditions as were applicable under such CalAtlantic option immediately prior to the consummation of the Merger as follows (i) the number of shares of CalAtlantic common stock to which the option related immediately prior to the effective time will be multiplied by (ii) 0.885 (rounded down, if necessary, to the nearest whole share of Lennar Class A common stock), plus one share of Lennar Class B common stock for each 50 shares of Class A common stock, subject to the terms of the option (including any vesting or forfeiture provisions or repurchase rights, but taking into account any acceleration or other deemed satisfaction thereof pursuant to the existing terms of the relevant CalAtlantic equity plans or applicable award agreement by reason of the transactions contemplated by the merger agreement). The exercise price of each outstanding option will be based on the exercise price of the CalAtlantic option per share of CalAtlantic common stock as of immediately prior to the effective time of the Merger, the exchange ratio of 0.885 shares of Lennar Class A common stock for each share of CalAtlantic common stock and equitable and proportionate adjustments taking into account a November 2017 Lennar Class B stock dividend. At or prior to the effective time of the Merger, Lennar will file a registration statement on Form S-8 (or any successor or other appropriate forms), with respect to the shares of Lennar common stock subject to such options, and it will use its commercially reasonable efforts to maintain the effectiveness of such registration statement for so long as such options remain outstanding.

If the employment of a holder of a CalAtlantic stock option is terminated, other than for “cause,” on or prior to first anniversary of the effective time of the Merger, any assumed and outstanding stock options held by such individual will become fully vested upon such termination of employment.

Treatment of Restricted Stock Units and Performance Share Units.

At the effective time of the Merger, each time-based or performance-based restricted stock unit, or RSU, award granted under any of the CalAtlantic equity plans that is outstanding immediately prior to the effective time of the Merger will be converted into a right to receive shares of Lennar common stock, on the same terms and conditions (including any vesting or forfeiture provisions or repurchase rights, but taking into account any acceleration or other deemed satisfaction thereof pursuant to the existing terms of the relevant CalAtlantic equity plans or applicable award agreement by reason of the transactions contemplated by the merger agreement) as were applicable under such RSUs as of immediately prior to the consummation of the Merger. The number of shares subject to the RSU will be equal to (i) the number of shares of CalAtlantic common stock subject to the

 



 

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restricted stock immediately prior to the effective time of the Merger multiplied by (ii) 0.885 (rounded down if necessary), plus one share of Lennar Class B common stock for each 50 shares of Class A common stock, subject to possible adjustment as provided in the merger agreement. All performance-based vesting criteria to which any outstanding CalAtlantic RSUs are subject for which the performance period is not completed as of the effective time of the Merger will be deemed achieved at the target performance level. At or prior to the effective time of the Merger, Lennar will file a registration statement on Form S-8 (or any successor or other appropriate forms), with respect to the shares of Lennar common stock subject to such RSUs and performance share units, or PSUs, and it will use its commercially reasonable efforts to maintain the effectiveness of such registration statement for so long as such RSUs remain outstanding.

If the employment of a holder of a CalAtlantic RSU is terminated, other than for “cause,” on or prior to first anniversary of the effective time, any assumed and outstanding RSUs held by such individual will become fully vested upon such termination of employment.

Treatment of Stock Appreciation Rights.

At the effective time of the Merger, each stock appreciation right, or SAR, based on shares of CalAtlantic common stock that is outstanding immediately prior to the effective time will automatically convert into a right based on the shares of Lennar Class A and Class B common stock, on the same terms and conditions (including any vesting or forfeiture provisions or repurchase rights, but taking into account any acceleration thereof pursuant to the existing terms of the relevant CalAtlantic equity plans or applicable award agreement by reason of the transactions contemplated by the merger agreement) as were applicable as of immediately prior to the effective time, subject to adjustment as provided in the merger agreement. Each SAR will convert into (i) the number of shares of CalAtlantic common stock to which the SAR related immediately prior to the effective time multiplied by (ii) 0.885 (rounded down, if necessary, to the nearest whole share of Lennar Class A common stock), plus one share of Lennar Class B common stock for each 50 shares of Class A common stock. The exercise price of each outstanding SAR will be based on the exercise price per share of CalAtlantic common stock as of immediately prior to the effective time of the Merger, the exchange ratio of 0.885 shares of Lennar Class A common stock for each share of CalAtlantic common stock, and equitable and proportionate adjustments taking into account the Class B dividend. If the holders of SARs are entitled to receive shares of Lennar Class A common stock on exercise of the SARs, at or prior to the effective time of the Merger, Lennar will file a registration statement on Form S-8 (or any successor or other appropriate forms), with respect to the shares of Lennar common stock subject to such SARs, and it will use its commercially reasonable efforts to maintain the effectiveness of such registration statement for so long as the SARs remain outstanding.

If the employment of a holder of a CalAtlantic SAR is terminated, other than for “cause,” on or prior to first anniversary of the effective time of the Merger, any assumed and outstanding SARs held by such individual will become fully vested upon such termination of employment.

For a more complete discussion of the treatment of CalAtlantic equity-based awards, see “The Merger Agreement—Treatment of Equity Awards” beginning on page 81. For further discussion of the treatment of CalAtlantic equity-based awards held by certain CalAtlantic directors and executive officers, see “The Merger—Interests of CalAtlantic Directors and Executive Officers in the Merger” beginning on page 68.

Treatment of CalAtlantic Convertible Debt (See Page 81)

Upon conversion of CalAtlantic convertible debt after the Merger, the holder will be entitled to receive with regard to each share of CalAtlantic common stock the holder would have received if the conversion had taken place immediately before the effective time of the Merger, the same consideration per share that is received by CalAtlantic stockholders who elect to receive cash, which may be wholly or primarily cash of $48.26 per share.

 



 

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However, Lennar intends to offer holders of CalAtlantic convertible debt for a limited period of time after the Merger takes place the option of electing to receive on conversion the same combination of Lennar Class A and Class B common stock and cash that is received in total by all holders of CalAtlantic stock. Based on the CalAtlantic common stock that was outstanding on January 4, 2018, this would be approximately 79% Lennar Class A and Class B common stock and 21% cash.

Board of Directors and Executive Officers After Completion of the Merger (See Page 67)

Upon completion of the Merger, the current members of the Lennar board of directors will continue to be directors of Lennar. They are Irving Bolotin, Steven L. Gerard, Theron I. (“Tig”) Gilliam, Sherrill W. Hudson, Sidney Lapidus, Teri McClure, Stuart Miller, Armando Olivera, Donna Shalala and Jeffrey Sonnenfeld. Lennar has agreed that immediately following the effective time of the Merger, Scott Stowell, who currently is the Executive Chairman of CalAtlantic’s board of directors, will be elected to serve on the Lennar board of directors, assuming Mr. Stowell is able to serve.

For more information about the directors and executive officers of Lennar after the Merger, see “The Merger—Board of Directors and Executive Officers After Completion of the Merger” beginning on page 67.

CalAtlantic Board Recommendation and Its Reasons for the Merger (See Page 54)

After careful consideration, the CalAtlantic board of directors recommends that CalAtlantic stockholders vote “FOR” each proposal being submitted to a vote of CalAtlantic stockholders at the CalAtlantic special meeting.

In the course of reaching its decision to approve the merger agreement and the transactions contemplated by the merger agreement, the CalAtlantic board of directors considered a number of factors. For a more complete discussion of these factors, see “The Merger—CalAtlantic Board Recommendation and Its Reasons for the Merger” beginning on page 54.

Opinion of CalAtlantic’s Financial Advisor (See Page 57)

CalAtlantic retained J.P. Morgan Securities LLC, which we refer to as “J.P. Morgan,” to act as financial advisor to the CalAtlantic board of directors in connection with the proposed Merger. At the meeting of the CalAtlantic board of directors on October 29, 2017, J.P. Morgan rendered its oral opinion to the CalAtlantic board of directors that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken by J.P. Morgan in preparing the opinion, the consideration to be paid to the holders of the CalAtlantic common stock in the proposed Merger was fair, from a financial point of view, to such stockholders. J.P. Morgan confirmed this oral opinion by delivering its written opinion to the CalAtlantic board of directors, dated October 29, 2017.

The full text of the written opinion of J.P. Morgan dated October 29, 2017, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken by J.P. Morgan in preparing the opinion, is attached as Annex C to this joint proxy statement/prospectus and is incorporated herein by reference. CalAtlantic stockholders are urged to read the opinion in its entirety. J.P. Morgan’s written opinion was addressed to the CalAtlantic board of directors (in its capacity as such) in connection with and for the purposes of its evaluation of the proposed Merger, was directed only to the consideration to be paid in the proposed Merger and did not address any other aspect of the proposed Merger. The opinion does not constitute a recommendation to any stockholder of CalAtlantic as to how such stockholder should vote with respect to the proposed Merger or any other matter. For a description of the opinion that the CalAtlantic board of directors received from J.P. Morgan, see “The Merger—Opinion of CalAtlantic’s Financial Advisor” beginning on page 57 of this joint proxy statement/prospectus.

 



 

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Interests of CalAtlantic Directors and Executive Officers in the Merger (See Page 68)

Directors and executive officers of CalAtlantic have certain interests in the Merger that may be different from or in addition to the general interests of CalAtlantic stockholders. These interests include, among others, potential severance benefits and other payments, the treatment of outstanding equity awards pursuant to their severance and change in control agreements, certain retention bonuses if they remain employed by CalAtlantic at the effective time of the Merger (subject to limited exceptions), and rights to ongoing indemnification and insurance coverage. The CalAtlantic board of directors was aware of and considered those interests, among other matters, in reaching its decision to (i) approve the Merger and the other transactions contemplated by the merger agreement, (ii) adopt, approve and declare advisable the merger agreement, and (iii) resolve to recommend the adoption of the merger agreement to CalAtlantic stockholders. See the section entitled “Interests of CalAtlantic’s Directors and Executive Officers in the Mergers” for a more detailed description of these interests.

At the close of business on January 4, 2018 (the record date for determining the CalAtlantic stockholders who are entitled to vote at the meeting), the number of outstanding CalAtlantic shares entitled to vote held by CalAtlantic’s directors, executive officers and their affiliates was 30,586,507 shares (including the shares held by MP CA Homes), which represented approximately 26.2% of the total voting power of the shares of CalAtlantic common stock outstanding on that date. Approval of the merger agreement requires the affirmative vote of a majority of the outstanding CalAtlantic shares entitled to vote thereon.

Voting Agreements (See Pages 98 and 99)

MP CA Homes, which owns approximately 24.3% of the outstanding CalAtlantic common stock, has agreed to vote all those shares in favor of adopting the merger agreement and approving any other Merger-related matters presented for a vote of the CalAtlantic stockholders. MP CA Homes has also agreed to vote those shares, and any other shares of CalAtlantic common stock that MP CA Homes owns or has the power to vote, against any transaction that would prevent or materially delay the Merger or deprive Merger Sub or Lennar of the material benefits of the Merger.

Stuart Miller, certain entities owned by trusts of which Mr. Miller and members of his family are the beneficiaries, which entities and trusts are referred to as the “Miller entities” and which collectively own Lennar stock that entitles them to cast approximately 39.0% of the votes that can be cast by all the Lennar stockholders (but only 0.73% of the votes that can be cast by holders of Class A common stock voting as a separate class), have agreed to vote all the shares of Lennar stock that they own or have the power to vote in favor of both of the Merger-related proposals that will be presented to the Lennar stockholders. Mr. Miller and the Miller entities have also agreed to vote those shares against any transaction that would prevent or materially delay the Merger.

If the Lennar board of directors changes its recommendation that Lennar’s stockholders vote in favor of the two Merger-related proposals, Mr. Miller and the Miller entities will be required to vote all of their shares of Class A common stock, but will only be required to vote shares of Class B common stock representing 30% of the outstanding Class B common stock (and, therefore, approximately 19.2% in voting power of the Class A and Class B common stock voting together), in favor of the proposals. They will be free to vote the remainder of the shares in their discretion.

Certain U.S. Federal Income Tax Considerations (See Page 75)

The Merger is intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Code and, in connection with the filing of the registration statement of which this joint proxy statement/prospectus is a part, CalAtlantic’s tax counsel, Gibson, Dunn & Crutcher LLP, which we refer to as Gibson Dunn, has rendered its tax opinion to CalAtlantic. It is the opinion of Gibson Dunn that subject to the qualifications and assumptions described in the section captioned “Certain U.S. Federal Income Tax Considerations” below, the Merger will

 



 

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qualify as a reorganization within the meaning of Section 368(a) of the Code. Based on that opinion, in the Merger, a CalAtlantic stockholder generally:

 

    will not recognize gain or loss as a result of receiving solely Lennar common stock as Merger consideration;

 

    will recognize gain (but not loss) as a result of receiving partly cash and partly Lennar common stock with respect to the holder’s CalAtlantic common stock in an amount equal to the lesser of (i) any gain realized with respect to that stock or (ii) the amount of any cash received with respect to that stock (other than any cash received in lieu of a fractional share of Lennar common stock);

 

    will recognize gain or loss as a result of receiving solely cash with respect to all the holder’s CalAtlantic common stock in an amount equal to the difference between the holder’s basis in the CalAtlantic common stock and the total amount of cash received as a result of the Merger; and

 

    will recognize gain (or loss) to the extent any cash received in lieu of a fractional share of Lennar common stock exceeds (or is less than) the basis of the fractional share.

Accounting Treatment of the Merger (See Page 67)

The Merger will be accounted for as an acquisition of CalAtlantic by Lennar under the acquisition method of accounting according to U.S. generally accepted accounting principles, which we refer to as “GAAP.”

For a more complete description of the accounting treatment of the Merger, see “The Merger—Accounting Treatment of the Merger” beginning on page 67.

No Appraisal Rights (See Page 68)

Appraisal rights are statutory rights that, if applicable, enable stockholders to dissent from an extraordinary transaction, such as a merger, and to demand that the corporation pay the fair value for their shares as determined by a court in a judicial proceeding instead of receiving the consideration being paid or issued to stockholders in connection with the extraordinary transaction. Under the DGCL, neither CalAtlantic stockholders nor Lennar stockholders will have appraisal or dissenters’ rights as a result of the Merger.

Regulatory Approvals Required for the Merger (See Page 67)

Lennar and CalAtlantic have determined that no authorizations, approvals or consents from regulatory authorities are required to enable them to complete the Merger. For a more complete discussion of regulatory matters relating to the Merger, see “The Merger—Regulatory Approvals Required for the Merger beginning on page 67.

Conditions to Completion of the Merger (See Page 84)

The parties expect to complete the Merger after all of the conditions in the merger agreement are satisfied or waived, including the receipt of stockholder approvals by CalAtlantic at the CalAtlantic special meeting and Lennar at the Lennar special meeting. However, it is possible that factors outside of either company’s control could prevent them from completing the Merger until a later time or not to complete the Merger at all.

The obligations of one or both of CalAtlantic and Lennar to consummate the Merger are conditioned upon the satisfaction (or waiver by the affected party) at or prior to the closing of the Merger of specified conditions, including the following:

 

    the representations and warranties of the other party or parties are true and correct in all material respects on the closing date (with specified exceptions);

 

    the other party will have fulfilled in all material respects all of its obligations under the merger agreement;

 



 

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    since the date of the merger agreement, nothing will have occurred, and no condition will have come into being, that has had or is reasonably expected to have a material adverse effect on the other party or parties (or on the surviving company after the Merger);

 

    the CalAtlantic Merger Proposal is approved by the holders of a majority of the outstanding shares of CalAtlantic common stock;

 

    the Lennar Merger Proposal is approved by the affirmative vote of the holders of a majority in voting power of the shares of Lennar Class A common stock and Class B common stock that are voted (treating abstentions as votes against), voting together as though they were a single class;

 

    if approval of the Lennar Authorized Share Proposal is necessary to enable Lennar to issue all the shares of Class A common stock it will be required to issue as a result of the Merger (which approval will probably not be necessary), the Lennar Authorized Share Proposal is approved by the affirmative vote of (i) the holders of a majority in voting power of the outstanding shares of Lennar Class A and Class B common stock, voting together as though they were a single class, and (ii) a majority of the shares of Lennar Class A common stock that are voted with regard to the proposal;

 

    no order of any court or other governmental authority will be in force that invalidates the merger agreement or restrains CalAtlantic, Lennar or Merger Sub from completing the Merger;

 

    the registration statement of which this joint proxy statement/prospectus is a part will have become effective under the Securities Act and no stop order suspending the effectiveness of the registration statement will have been issued and no proceedings for that purpose will have been initiated or threatened in writing by the SEC;

 

    the shares of Lennar stock deliverable to CalAtlantic stockholders in the Merger will have been approved for listing on the NYSE; and

 

    CalAtlantic will have received an opinion of its counsel, to the effect that the Merger will constitute a “reorganization” within the meaning of Section 368(a) of the Code.

The conditions set forth in the merger agreement may be waived by Lennar or CalAtlantic, subject to applicable law and the agreement of the other party in certain circumstances. If approval of the Lennar Authorized Share Proposal is not required in order for Lennar to be able to issue all the shares it will be required to issue as a result of the Merger, including shares it may be required to issue as a result of conversions of CalAtlantic convertible debt and exercises of CalAtlantic options, restricted stock units and stock appreciation rights, Lennar will complete the Merger even if the Lennar Authorized Share Proposal is not approved. For a more complete discussion of the conditions to the Merger, see “The Merger Agreement—Conditions to Completion of the Merger” beginning on page 84.

No Solicitation; Notice of Proposals (See Page 90)

Subject to certain exceptions discussed below, CalAtlantic is required to:

 

    terminate all ongoing discussions with third parties regarding alternative acquisition proposals or otherwise regarding possible acquisition transactions; and

 

    not authorize or approve and to use its reasonable best efforts so that none of its subsidiaries’ officers, directors, employees, agents or other representatives will initiate, solicit, knowingly encourage or otherwise knowingly facilitate (by making available non-public information or otherwise) any alternative acquisition proposal or any inquiry, proposal or offer with respect to (i) a merger, reorganization, share exchange, consolidation or similar transaction involving CalAtlantic, or (ii) any purchase of or tender or exchange offer for all or any significant portion of CalAtlantic’s equity securities, or (iii) any purchase of all or, except in the ordinary course of business, a significant portion of the assets of CalAtlantic and its subsidiaries on a consolidated basis.

 



 

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Notwithstanding the above, in connection with any inquiry, proposal or offer with respect to a possible acquisition transaction that CalAtlantic receives despite complying in all material respects with the obligations listed immediately above, CalAtlantic, its subsidiaries and their respective representatives may:

 

    interact with a potential acquiror solely to clarify the terms and conditions of any alternative acquisition proposal that the potential acquiror has made; and

 

    furnish non-public information (after receipt of an appropriate confidentiality agreement) to, and enter into discussions and negotiations with, a potential acquiror in response to an alternative acquisition proposal which (i) CalAtlantic receives despite complying in all material respects with the prohibition against solicitation of proposals, and (ii) the CalAtlantic board of directors determines in good faith, after consultation with its independent financial advisor, constitutes or would be reasonably expected to be or result in a transaction that would be more favorable to the CalAtlantic stockholders than the Merger.

A “superior proposal” means an alternative acquisition proposal, which (v) is not subject to the outcome of due diligence or any other form of investigation, (w) is not subject to a financing contingency, (x) is from a potential acquiror which the CalAtlantic board reasonably determines in good faith after consultation with its independent financial advisor has the financial resources necessary to carry out the transaction, (y) is not reasonably likely to be the subject of regulatory concerns that could prevent or materially delay completion of the transaction, and (z) the CalAtlantic board determines in good faith after consultation with its independent financial advisor, and taking account of, among other things, the value of the synergy benefits resulting from the proposed transaction with Lennar, to be more favorable to the CalAtlantic’s stockholders than the proposed transaction with Lennar.

If at any time, CalAtlantic receives an alternative acquisition proposal, request for non-public information in connection with such a proposal or an indication that a prospective acquiror intends to make such a proposal, then within two business days, CalAtlantic must inform Lennar of the proposal, request or indication, provide the identity of the third party from which the proposal, request or indication was received, and provide a reasonably detailed description of the material terms of the proposal, request or indication. Further, CalAtlantic must thereafter promptly provide Lennar with any additional material information CalAtlantic obtains regarding such proposal, request, indication or notification, and otherwise keep Lennar reasonably informed as to the status of the alternative acquisition proposal.

Termination of the Merger Agreement (See Page 94 )

The merger agreement may be terminated prior to the effective time of the Merger, whether before or after approval of the Merger proposal by CalAtlantic stockholders, Lennar stockholders, or both (except as otherwise provided below), by the mutual written consent of CalAtlantic or Lennar, or by one or both of CalAtlantic and Lennar as follows:

by either CalAtlantic or Lennar (provided that such party is not in breach or such party’s breach is not the primary cause of such condition, as applicable):

 

    if the closing date does not occur on or before May 31, 2018; provided, however, that if the closing does not occur on or before such date because of an order of a court or other governmental authority invalidating the merger agreement or restraining a party from completing the Merger, either CalAtlantic or Lennar may extend the outside date by three additional months until August 31, 2018 (we refer to such date, including if extended, as the “outside date”);

 

    if (i) any law is in effect that would make the Merger unlawful, or (ii) any order of any governmental entity is entered permanently enjoining CalAtlantic, Lennar or Merger Sub from consummating the Merger and the order has become final and non-appealable;

 



 

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    if the special meeting of CalAtlantic stockholders is held, but the CalAtlantic stockholders do not give the required stockholder approval; or

 

    if the special meeting of Lennar stockholders meeting is held, but the Lennar stockholders do not give the required stockholder approval or approvals.

by CalAtlantic (provided that CalAtlantic is not in breach or CalAtlantic’s breach is not the primary cause of the condition, as applicable):

 

    if either Lennar or Merger Sub has breached any of its representations, warranties, covenants or agreements in the merger agreement in a way that would give rise to failure of certain conditions to closing, and this breach is either incurable or not cured within 30 business days after Lennar’s receipt of written notice of such breach or one business day prior to the outside date;

 

    if, prior to approval of the Merger proposal by CalAtlantic stockholders, CalAtlantic receives an alternative acquisition proposal that CalAtlantic’s board of directors determines is a superior proposal, after receipt of notice from CalAtlantic, Lennar does not agree to modify the terms of the merger agreement so that the CalAtlantic board of directors determines that the alternative acquisition proposal no longer is a superior proposal, and CalAtlantic pays Lennar a termination fee;

 

    if all the conditions to Lennar’s and Merger Sub’s obligations to effect the Merger have been satisfied, but Lennar and Merger Sub have failed to consummate the Merger by the time the closing should have occurred pursuant to the merger agreement, which failure is a breach of Lennar and Merger Sub’s obligations under the merger agreement;

 

    if, prior to approval of the Lennar Merger Proposal by the Lennar stockholders, the Lennar board of directors withdraws or modifies in an adverse manner its recommendation that Lennar stockholders vote “FOR” the Lennar Merger Proposal and the Lennar Authorized Shares Proposal; or

by Lennar (provided that neither Lennar nor Merger Sub is in breach or Lennar’s or Merger Sub’s breach is not the primary cause of the condition, as applicable):

 

    if CalAtlantic has breached any of its representations, warranties, covenants or agreements in the merger agreement in a way that would give rise to failure of certain conditions to closing, and this breach is either incurable or not cured within 30 business days after CalAtlantic’s receipt of written notice of the breach from Lennar or one business day prior to the outside date;

 

    if all the conditions to CalAtlantic’s obligations to effect the Merger have been satisfied, but CalAtlantic has failed to consummate the Merger by the time the closing should have occurred pursuant to the merger agreement, which failure is a breach of CalAtlantic’s obligations under the merger agreement;

 

    if, prior to approval of the Merger proposal by CalAtlantic stockholders, (i) the CalAtlantic board of directors fails to reaffirm publicly its recommendation of the Merger within ten business days after an alternative acquisition proposal is first publicly announced, if Lennar requests such a reaffirmation, (ii) any person other than Lennar and its affiliates commences a tender or exchange offer for 50% or more of the outstanding CalAtlantic common stock, and (A) the CalAtlantic board of directors or a board committee recommends that the CalAtlantic stockholders tender all or a portion of their CalAtlantic stock in response to the offer, or (B) CalAtlantic does not within ten business days after the tender or exchange offer is commenced, file with the SEC a Statement on Schedule 14D-9 which contains a recommendation that CalAtlantic stockholders not tender their CalAtlantic common stock in response to the offer; or

 

    if, prior to approval of the Merger proposal by CalAtlantic stockholders the CalAtlantic board of directors withdraws or modifies in an adverse manner its recommendation that CalAtlantic stockholders vote “FOR” approval of the Merger proposal.

 



 

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Effect of Termination; Termination Fees; Expense Reimbursement (See Pages 96)

If the merger agreement is validly terminated, then, with certain exceptions, the merger agreement will be null and void and none of the parties will have any further rights or obligations under it. However, termination of the merger agreement will not relieve either party of liability for any knowing and intentional breach of any of its covenants and agreements in the merger agreement before the merger agreement is terminated.

CalAtlantic will be required to pay Lennar a termination fee of $178.7 million if:

 

    CalAtlantic terminates the merger agreement to enter into a superior proposal;

 

    CalAtlantic or Lennar terminates the merger agreement because the Merger has not closed by the outside date, and prior to the date of termination, a company acquisition proposal shall have been submitted by a potential acquiror and not rejected or withdrawn, and CalAtlantic completes an alternative transaction within 12 months after termination of the merger agreement with such potential acquiror;

 

    CalAtlantic or Lennar terminates the merger agreement because the CalAtlantic stockholders do not approve the Merger proposal, and prior to the date of the stockholder meeting, a company acquisition proposal shall have been submitted and not rejected or withdrawn by a potential acquiror, and CalAtlantic completes an alternative transaction within 12 months after termination of the merger agreement with such potential acquiror;

 

    Lennar terminates the merger agreement after the CalAtlantic board of directors withdraws or negatively modifies its recommendation that CalAtlantic stockholders vote to approve the Merger;

 

    Lennar terminates the merger agreement because CalAtlantic has breached any of its representations, warranties, covenants or agreements in the merger agreement in a way that would give rise to failure of designated conditions to closing not being satisfied, and this breach is either incurable or not cured within 30 business days after CalAtlantic’s receipt of written notice of the breach from Lennar or one business day prior to the outside date;

 

    Lennar terminates the merger agreement because all the conditions to CalAtlantic’s obligations to effect the Merger have been satisfied, but CalAtlantic has failed to consummate the Merger by the time the closing should have occurred pursuant to the merger agreement, which failure is a breach of CalAtlantic’s obligations under the merger agreement; or

 

    Lennar terminates the merger agreement because prior to approval of the Merger proposal by CalAtlantic stockholders, (i) the CalAtlantic board of directors fails to reaffirm publicly its recommendation of the Merger within ten business days after an alternative acquisition proposal is first publicly announced, if Lennar requests such a reaffirmation, or (ii) any person other than Parent and its affiliates commences a tender or exchange offer for 50% or more of the outstanding CalAtlantic common stock, and (A) the CalAtlantic board of directors or a board committee recommends that the CalAtlantic stockholders tender all or a portion of their CalAtlantic stock in response to the offer, or (B) CalAtlantic does not within ten business days after the tender or exchange offer is commenced, file with the SEC a Statement on Schedule 14D-9 which contains a recommendation that CalAtlantic stockholders not tender their CalAtlantic common stock in response to the offer.

Lennar will be required to pay CalAtlantic a termination fee of $178.7 million if:

 

    the merger agreement is terminated because the Merger does not take place by the outside date and (i) prior to the termination Lennar had received or communicated a proposal to acquire a homebuilding company that in the preceding year had delivered at least 14,000 homes that is not rejected or withdrawn and (ii) within 12 months after the merger agreement is terminated, Lennar acquires that homebuilding company;

 



 

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    CalAtlantic terminates the merger agreement after the Lennar board of directors withdraws or negatively modifies its recommendation that Lennar stockholders vote in favor of the Lennar Merger Proposal and the Lennar Authorized Share Proposal;

 

    CalAtlantic terminates the merger agreement because Lennar or Merger Sub has breached any of its representations, warranties, covenants or agreements in the merger agreement in a way that would give rise to failure of designated conditions to closing, and this breach is either incurable or not cured within 30 business days after Lennar’s receipt of written notice of such breach or one business day prior to the outside date; or

 

    CalAtlantic terminates the merger agreement because all the conditions to Lennar’s and Merger Sub’s obligations to effect the Merger have been satisfied, but Lennar and Merger Sub have failed to consummate the Merger by the time the closing should have occurred pursuant to the merger agreement, which failure is a breach of Lennar and Merger Sub’s obligations under the merger agreement.

If the Lennar stockholders do not give the stockholder approval or approvals that are necessary for Lennar to consummate the Merger, Lennar will have to reimburse CalAtlantic for its reasonable out-of-pocket Merger related expenses, up to $30 million. If the CalAtlantic stockholders do not give the stockholder approval that is necessary for CalAtlantic to consummate the Merger, CalAtlantic will have to reimburse Lennar for its reasonable out-of-pocket Merger related expenses, up to $30 million.    

Summary of Risk Factors Related to the Merger (See Page 26)

You should carefully consider all of the risk factors together with all of the other information included in this joint proxy statement/prospectus before deciding how to vote. The risks related to the Merger are described under the section “Risk Factors—Risk Factors Relating to the Merger” beginning on page 26.

 

    The exchange ratio and the cash consideration are fixed and will not be adjusted in the event of any change in the stock price for either CalAtlantic or Lennar.

 

    CalAtlantic stockholders who elect to receive the cash consideration may nonetheless receive a prorated portion of their merger consideration in the form of Lennar stock if the maximum cash amount is exceeded.

 

    CalAtlantic and Lennar will be subject to various uncertainties and contractual restrictions, including the risk of litigation, while the Merger is pending that may cause disruption from the transaction and may make it more difficult to maintain or develop relationships with employees, suppliers or customers.

 

    Lennar may have difficulty integrating the CalAtlantic business and anticipated benefits of combining CalAtlantic and Lennar may not be realized.

 

    Completion of the transactions may trigger assignment, change of control or other provisions in certain agreements to which CalAtlantic is a party.

 

    Failure to complete the Merger could negatively impact the stock prices and the future business and financial results of CalAtlantic and Lennar.

 

    The pro forma financial statements included in this joint proxy statement/prospectus are presented for illustrative purposes only and may not be an indication of Lennar’s financial condition or results of operations following the Merger.

 

    The Merger is subject to certain conditions, including conditions that may not be satisfied or completed on a timely basis, if at all.

 



 

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    Any delay in completing the Merger may reduce the benefits expected to be achieved thereunder.

 

    CalAtlantic’s executive officers and directors have interests in the Merger that may be different from, or in addition to, the interests of CalAtlantic stockholders generally.

 

    The merger agreement contains provisions that could discourage a potential competing acquiror of either CalAtlantic or Lennar.

 

    The shares of Lennar common stock that may be received by CalAtlantic stockholders as a result of the Merger will have different rights from the shares of CalAtlantic common stock.

 

    CalAtlantic and Lennar stockholders do not have dissenters’ or appraisal rights in the Merger.

 

    The fairness opinion obtained by the board of director of CalAtlantic from its financial advisor will not reflect changes in circumstances between signing the merger agreement and the completion of the Merger.

 

    CalAtlantic and Lennar may incur substantial unexpected transaction fees and merger-related costs in connection with the Merger.

 

    The market price of Lennar Class A and Class B common stock after the Merger may be affected by factors different from those affecting the shares of CalAtlantic common stock currently.

 

    If the Merger does not qualify as a reorganization under Section 368(a) of the Code, CalAtlantic and the stockholders of CalAtlantic may be required to pay substantial U.S. federal income taxes.

 

    Holders of CalAtlantic and Lennar common stock will have a reduced ownership and voting interest after the Merger and will exercise less influence over management.

 

    The Merger and related transactions will significantly increase the ratio of Lennar’s total debt to its total capital.

 

    The Merger will add a substantial amount of goodwill to Lennar’s balance sheet.

Purpose of the CalAtlantic Special Meeting; Required Vote (See Pages 106 and 107)

At the CalAtlantic special meeting, CalAtlantic stockholders will be asked to consider and vote upon:

 

    the CalAtlantic Merger Proposal;

 

    the CalAtlantic Merger-Related Compensation Proposal; and

 

    the CalAtlantic Adjournment Proposal.

Approval of the CalAtlantic Merger Proposal requires the affirmative vote of holders of a majority of the outstanding shares of the CalAtlantic common stock entitled to vote on the proposal. Approval of the CalAtlantic Merger-Related Compensation Proposal requires the affirmative vote of holders of a majority in voting interest of the CalAtlantic stockholders present in person or represented by proxy at the CalAtlantic special meeting in which a quorum is present and entitled to vote on the proposal, although such vote will not be binding on CalAtlantic or its board of directors or any of its committees. Approval of the CalAtlantic Adjournment Proposal requires the affirmative vote of holders of a majority in voting interest of the CalAtlantic stockholders present in person or represented by proxy at the CalAtlantic special meeting and entitled to vote on the proposal.

Approval of the CalAtlantic Merger Proposal is required for completion of the Merger.

Ownership of CalAtlantic Shares by CalAtlantic Directors and Executive Officers (See Page 103)

As of January 4, 2018 (the record date for determining the CalAtlantic stockholders who are entitled to vote at the special meeting), CalAtlantic directors and executive officers and their affiliates owned and were entitled

 



 

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to vote 30,586,507 shares of CalAtlantic common stock, or approximately 26.2% of the total voting power of the shares of CalAtlantic common stock outstanding on that date.

Purpose of the Lennar Special Meeting; Required Vote (See Page 110)

At the Lennar special meeting, Lennar stockholders will be asked to consider and vote upon:

 

    the Lennar Merger Proposal;

 

    the Lennar Authorized Share Proposal; and

 

    the Lennar Adjournment Proposal.

Approval of the Lennar Merger Proposal requires the affirmative vote of a majority in voting power of the shares of Class A common stock and Class B common stock that are voted with regard to the proposal at the Lennar special meeting at which a quorum is present (treating abstentions as votes against), voting together as though they were a single class. The Lennar Authorized Share Proposal requires the affirmative vote of both (i) the holders of a majority in voting power of the outstanding shares of Class A common stock and Class B common stock, voting together as though they were a single class, and (ii) the holders of a majority of the shares of Class A common stock that are voted with regard to the proposal at the Lennar special meeting at which a quorum is present. The Lennar Adjournment Proposal requires the affirmative vote of a majority in voting power of the shares of Class A common stock and Class B common stock that are voted, voting together as though they were a single class.

Approval of the Lennar Merger Proposal is required for completion of the Merger. If the number of shares of Class A common stock that Lennar is required to issue in the Merger exceeds the number of shares of Class A common stock that Lennar currently is authorized to issue (which would be the case if no CalAtlantic stockholders exercise the cash election option under the merger agreement), approval of the Lennar Authorized Share Proposal would also be required for completion of the Merger. Lennar has an agreement with MP CA Homes assuring that the cash election will be exercised with respect to the maximum number of shares as to which it can be exercised, and therefore Lennar should be able to complete the Merger even if the Lennar Authorized Share Proposal is not approved. See “The MP CA Homes Voting and Cash Election Agreement.”

The Lennar board of directors unanimously recommends that Lennar stockholders vote “ FOR ” all the proposals set forth above, as more fully described in the section titled “Lennar Special Meeting—Purpose of the Lennar Special Meeting” beginning on page 110.

Ownership of Lennar Shares by Lennar Directors and Executive Officers (See Page 102)

As of the record date, Lennar directors and executive officers and their affiliates owned and were entitled to vote 4,581,782 shares of Lennar Class A common stock and 22,085,396 shares of Lennar Class B common stock, which gave them approximately 2.2% of the total voting power of Lennar Class A common stock outstanding on that date, and approximately 40.0% of the total voting power of Lennar Class A and Class B Stock outstanding on that date, voting together as though they were a single class.

 



 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF LENNAR

The following table sets forth selected historical consolidated financial and operating information about Lennar at or for the nine months ended August 31, 2017 and August 31, 2016, and at or for the fiscal years ended November 30, 2012 through 2016. The information presented below is based upon Lennar’s historical consolidated financial statements. The selected historical consolidated financial data of Lennar for each of the years ended November 30, 2016, 2015 and 2014 and at November 30, 2016 and 2015 have been derived from Lennar’s audited consolidated financial statements contained in Lennar’s Annual Report on Form 10-K for the year ended November 30, 2016, which is incorporated by reference into this joint proxy statement/prospectus. The financial data for the nine month periods ended August 31, 2017 and 2016 and at August 31, 2017 are derived from Lennar’s unaudited condensed consolidated financial statements contained in Lennar’s Quarterly Report on Form 10-Q for the quarterly period ended August 31, 2017, which is incorporated by reference into this joint proxy statement/prospectus.

The selected historical consolidated financial data for the fiscal years ended November 30, 2013 and 2012 and at November 30, 2014, 2013 and 2012 have been derived from Lennar’s audited consolidated financial statements at or for the years ended on those dates, which have not been incorporated by reference into this joint proxy statement/prospectus. The selected historical consolidated financial data at August 31, 2016 have been derived from Lennar’s unaudited interim consolidated financial statements and related notes thereto contained in Lennar’s Quarterly Report on Form 10-Q for the quarterly period ended August 31, 2016, which has not been incorporated by reference into this joint proxy statement/prospectus. The information set forth below is only a summary and is not necessarily indicative of the results of future operations of Lennar, and you should read the following information together with (i) Lennar’s audited consolidated financial statements and the related notes, and the sections captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Lennar’s Annual Report on Form 10-K for the year ended November 30, 2016 and (ii) Lennar’s unaudited interim consolidated financial statements, the related notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Lennar’s Quarterly Report on Form 10-Q for the quarterly period ended August 31, 2017. For more information, see “Where You Can Find More Information” beginning on page 133.

 

    At or for the Nine Months
Ended August 31,
    At or for the Years Ended November 30,  
    2017     2016     2016     2015     2014     2013     2012  
(Dollars in thousands, except per share amounts)                                          

Statement of Operations Data:

             

Revenues:

             

Homebuilding

  $ 7,789,630       6,734,335       9,741,337       8,466,945       7,025,130       5,354,947       3,581,232  

Financial services

  $ 571,462       491,340       687,255       620,527       454,381       427,342       384,618  

Rialto

  $ 207,804       152,434       233,966       221,923       230,521       138,060       138,856  

Multifamily

  $ 291,900       195,264       287,441       164,613       69,780       14,746       426  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

  $ 8,860,796       7,573,373       10,949,999       9,474,008       7,779,812       5,935,095       4,105,132  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating earnings (loss):

             

Homebuilding (1)

  $ 790,194       908,216       1,344,932       1,271,641       1,033,721       733,075       258,985  

Financial Services

  $ 113,448       112,267       163,617       127,795       80,138       85,786       84,782  

Rialto

  $ (10,497     (16,533     (16,692     33,595       44,079       26,128       11,569  

Multifamily

  $ 34,816       29,774       71,174       (7,171     (10,993     (16,988     (5,884

Corporate general and
administrative expenses

  $ 200,333       164,634       232,562       216,244       177,161       146,060       127,338  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings before income taxes

  $ 727,628       869,090       1,330,469       1,209,616       969,784       681,941       222,114  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net earnings attributable to Lennar (2)

  $ 500,890       598,391       911,844       802,894       638,916       479,674       679,124  

Earnings per common share:

             

Basic

  $ 2.13       2.74       4.13       3.87       3.12       2.48       3.58  

Diluted

  $ 2.13       2.59       3.93       3.46       2.80       2.15       3.11  

 



 

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Financial Position:

             

Total assets

  $ 16,939,373       14,998,720       15,361,781       14,419,509       12,923,151       11,239,885       10,323,177  

Debt:

             

Homebuilding

  $ 5,523,765       4,920,848       4,575,977       5,025,130       4,661,266       4,165,792       3,971,348  

Rialto

  $ 617,152       576,448       622,335       771,728       617,077       437,161       569,154  

Financial services

  $ 719,727       913,040       1,077,228       858,300       704,143       374,166       457,994  

Multifamily

    —         —         —         —         —         13,858       —    

Stockholders’ equity

  $ 7,554,260       6,545,535       7,026,042       5,648,944       4,827,020       4,168,901       3,414,764  

Total equity

  $ 7,659,460       6,762,906       7,211,567       5,950,072       5,251,302       4,627,470       4,001,208  

Shares outstanding (000s)

    235,264       227,803       234,475       211,146       205,039       204,412       191,548  

Stockholders’ equity per share

  $ 32.11       28.73       29.96       26.75       23.54       20.39       17.83  

Homebuilding Data (including unconsolidated entities):

             

Number of homes delivered

    20,761       18,335       26,563       24,292       21,003       18,290       13,802  

New orders

    22,991       20,774       27,372       25,106       22,029       19,043       15,684  

Backlog of home sales contracts

    10,212       9,253       7,623       6,646       5,832       4,806       4,053  

Backlog dollar value

  $ 4,069,906       3,444,243       2,891,538       2,477,751       1,974,328       1,619,601       1,160,385  

 

(1) Homebuilding operating earnings for the nine months ended August 31, 2017 includes loss due to litigation totaling $140 million.
(2) Net earnings attributable to Lennar for the year ended November 30, 2013 included $177.0 million net tax provision, which included a tax benefit of $67.1 million for a valuation allowance reversal. Net earnings attributable to Lennar for the year ended November 30, 2012 included $435.2 million of benefit for income taxes, which included a reversal of the majority of our deferred tax asset valuation allowance of $491.5 million, partially offset by a tax provision for fiscal year 2012 pre-tax earnings.

 



 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF CALATLANTIC

The following statement of operations data for the years ended December 31, 2016, 2015 and 2014 and the balance sheet data as of December 31, 2016 and 2015 have been derived from the audited consolidated financial statements of CalAtlantic contained in its Annual Report on Form 10-K for the year ended December 31, 2016, which are incorporated into this document by reference. The statement of operations data for the years ended December 31, 2013 and 2012, and the balance sheet data as of December 31, 2014, 2013 and 2012 have been derived from the audited consolidated financial statements of CalAtlantic for such periods, which have not been incorporated into this document by reference.

The summary selected historical financial data for the nine months ended September 30, 2017 and 2016, and as of September 30, 2017, have been derived from the unaudited interim consolidated financial statements of CalAtlantic contained in its Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2017, which is incorporated into this document by reference. The summary selected historical financial data as of September 30, 2016 have been derived from the unaudited interim consolidated financial statements of CalAtlantic contained in its Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2016, which has not been incorporated into this document by reference. These financial statements are unaudited, but, in the opinion of CalAtlantic’s management, contain all adjustments necessary to present fairly CalAtlantic’s financial position and results of operations for the periods indicated.

On October 1, 2015, Standard Pacific Corp. completed its merger with The Ryland Group, Inc., with Standard Pacific Corp. continuing as the surviving corporation and changing its name to CalAtlantic Group, Inc. Because the closing of the merger occurred during the year ended December 31, 2015, the financial information and operating data below for the years ended December 31, 2014, 2013 and 2012, includes only stand-alone data for predecessor Standard Pacific Corp., and the financial information and operating data below for the year ended December 31, 2015 include Ryland’s operations only from and after October 1, 2015. In connection with the Standard Pacific/Ryland merger, CalAtlantic completed a one-for-five reverse stock split. All prior period share and per share amounts have been restated to reflect such reverse stock split. Effective December 31, 2015, CalAtlantic early adopted ASU No. 201503, Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). ASU 2015-03 was retrospectively applied to the financial statements and as such, homebuilding other assets and homebuilding debt for all periods presented have been adjusted accordingly. Please see Note 2.w. of the CalAtlantic consolidated financial statements for the year ended December 31, 2015, set forth in CalAtlantic’s Annual Report on Form 10-K for the year ended December 31, 2015. See the section entitled “Where You Can Find More Information” beginning on page 133.

Historical results are not necessarily indicative of the results that may be expected for any future period. This selected consolidated financial data should be read in conjunction with CalAtlantic’s Annual Report on Form 10-K for the year ended December 31, 2016 and CalAtlantic’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2017, including the related notes and section captioned “Management’s

 



 

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Discussion and Analysis of Financial Condition and Results of Operations.” See the section entitled “Where You Can Find More Information” beginning on page 133.

 

    Nine Months Ended
September 30,
    Year Ended December 31,  
    2017     2016     2016     2015 (1)     2014     2013     2012  
    (Dollars in thousands, except per share amounts)  

Statement of Operations Data:

             

Revenues:

             

Homebuilding

  $ 4,474,656     $ 4,435,003     $ 6,388,040     $ 3,496,411     $ 2,411,178     $ 1,914,609     $ 1,236,958  

Financial services

  $ 60,394       59,524       88,695       43,702       25,320       25,734       21,769  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

  $ 4,535,050     $ 4,494,527     $ 6,476,735     $ 3,540,113     $ 2,436,498     $ 1,940,343     $ 1,258,727  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Pretax income:

             

Homebuilding

  $ 408,813     $ 480,678     $ 713,502     $ 325,550     $ 340,121     $ 246,269     $ 67,645  

Financial Services

  $ 23,475       24,889       39,614       16,939       9,843       11,429       10,542  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Pretax income

  $ 432,288     $ 505,567     $ 753,116     $ 342,489     $ 349,964     $ 257,698     $ 78,187  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (2)

  $ 274,966     $ 317,769     $ 484,730     $ 213,509     $ 215,865     $ 188,715     $ 531,421  

Income per common share:

             

Basic

  $ 2.43     $ 2.66     $ 4.09     $ 2.51     $ 2.94     $ 2.59     $ 7.59  

Diluted

  $ 2.14     $ 2.34     $ 3.60     $ 2.26     $ 2.68     $ 2.36     $ 7.21  

Cash dividends declared per
common share

  $ 0.12     $ 0.12     $ 0.16     $ 0.04     $ —       $ —       $ —    

Balance Sheet Data :

             

Total assets

  $ 9,079,034     $ 8,632,461     $ 8,709,044     $ 8,429,402     $ 4,151,639     $ 3,637,552     $ 3,087,268  

Homebuilding debt

  $ 3,822,138     $ 3,580,729     $ 3,419,787     $ 3,487,699     $ 2,113,301     $ 1,815,042     $ 1,516,212  

Financial services debt

  $ 152,786     $ 161,898     $ 247,427     $ 303,422     $ 89,413     $ 100,867     $ 92,159  

Stockholders’ equity

  $ 4,329,211       4,134,435       4,207,586       3,861,436       1,676,688       1,468,960       1,255,816  

Shares outstanding (000s)

    110,217       117,348       114,429       121,286       72,591       73,086       72,212  

Stockholders’ equity per share (3)

  $ 39.28       35.23       36.77       31.84       30.47       26.46       29.45  

Pro forma stockholders’ equity per common share (4)

  $ 39.28       35.23       36.77       31.84       23.10       20.10       17.39  

Homebuilding Data (including unconsolidated entities):

             

Number of homes delivered

    10,045       9,891       14,229       7,237       4,956       4,602       3,291  

New orders

    11,798       11,587       14,435       7,163       4,967       4,898       4,014  

Backlog of home sales contracts

    7,570       7,307       5,817       5,611       1,711       1,700       1,404  

Backlog dollar value

  $ 3,708,701       3,314,883       2,663,851       2,572,092       916,376       800,494       515,469  

 

(1) 2015 full year results include Ryland’s operations since October 1, 2015. Please see Note 3 of the consolidated financial statements contained in CalAtlantic’s Annual Report on Form 10-K for the year ended December 31, 2016.
(2) Net income for 2012 includes a $454 million income tax benefit resulting from the reversal of a portion of the deferred tax asset valuation allowance.
(3) At December 31, 2012, common shares outstanding exclude 29.6 million common equivalent shares issued during the year ended December 31, 2008 in the form of preferred stock to MP CA Homes. On May 20, 2013, MP CA Homes converted 36,600 shares of its preferred stock into 12 million shares of Standard Pacific Corp. common stock. As a result, at December 31, 2014 and 2013, common shares outstanding exclude 17.6 million common equivalent shares issuable upon conversion of preferred shares outstanding. In addition, on October 1, 2015, MP CA Homes converted their remaining 53,565 shares of their preferred stock into 17.6 million shares of common stock in connection with CalAtlantic’s merger with The Ryland Group, Inc., and no common equivalent shares issuable upon conversion of preferred shares were outstanding at December 31, 2015 or 2016.
(4) At December 31, 2012, pro forma common shares outstanding include 29.6 million common equivalent shares issuable upon conversion of preferred shares outstanding. As a result of the conversion of preferred shares by MP CA Homes described above, at December 31, 2014 and 2013, pro forma common shares outstanding include 17.6 million common equivalent shares issuable upon conversion of preferred shares outstanding.

 



 

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SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The following summary pro forma financial information is based on the historical financial statements of Lennar as of August 31, 2017 and CalAtlantic as of September 30, 2017 and for the nine months then ended, and for the year ended November 30, 2016 for Lennar and for the year ended December 31, 2016 for CalAtlantic, each of which is incorporated by reference into this joint proxy statement/prospectus, adjusted to give effect to the Merger and related financing as described under “The Merger—Financing Related to the Merger” and “Unaudited Pro Forma Condensed Combined Financial Statements of Lennar and CalAtlantic” included in this joint proxy statement/prospectus. This pro forma financial information is being presented solely for informational purposes and is not necessarily indicative of the combined results of operations or financial position that might have been achieved for the periods or dates indicated, nor is it necessarily indicative of the results that may be expected following the Merger.

The following table presents selected unaudited pro forma combined financial information about Lennar’s consolidated balance sheet and statements of operations, after giving effect to the Merger. The information under “Statement of Operations Data” in the following table gives effect to the Merger as if it had been consummated on December 1, 2015, the beginning of the earliest period presented. The information under “Financial Position Data” in the following table assumes the Merger was consummated on August 31, 2017. This unaudited pro forma combined financial information was prepared using the acquisition method of accounting with Lennar considered the acquirer of CalAtlantic.

In addition, the unaudited pro forma combined financial information includes adjustments that are preliminary and may be revised. There can be no assurance that such revisions will not result in material changes. The unaudited pro forma combined financial information is presented for illustrative purposes only and may not be indicative of financial results of the combined company.

The information presented below should be read in conjunction with the historical consolidated financial statements of Lennar and CalAtlantic, including the related notes, filed by each of them with the SEC, and incorporated by reference into this joint proxy statement/prospectus and with the pro forma condensed combined financial statements of Lennar and CalAtlantic, including the related notes, appearing elsewhere in this document. See “Where You Can Find More Information” beginning on page 133 and “Unaudited Pro Forma Condensed Combined Financial Statements of Lennar and CalAtlantic” beginning on page F-1. The unaudited pro forma condensed combined financial data are presented for illustrative purposes only, and are not necessarily indicative of results that actually would have occurred or that may occur in the future had the Merger been completed on the dates indicated. Accordingly this information should not be relied upon for purposes of making any investment or other decisions.

The unaudited pro forma financial statements also give effect to the Senior Notes Offering as though it had occurred as of the same date as the Merger.

Lennar’s fiscal year ends on November 30, and CalAtlantic’s fiscal year ends on December 31. As a consequence of Lennar’s and CalAtlantic’s different fiscal year ends:

 

    The unaudited pro forma condensed combined balance sheet as of August 31, 2017 combines Lennar’s historical unaudited condensed consolidated balance sheet as of August 31, 2017, which was the end of Lennar’s third fiscal quarter, and CalAtlantic’s historical unaudited consolidated balance sheet as of September 30, 2017, which was the end of CalAtlantic’s third fiscal quarter.

 

   

The unaudited pro forma condensed combined statement of operations for the nine months ended August 31, 2017 combines Lennar’s historical unaudited condensed consolidated statement of operations for the nine months ended August 31, 2017, which were the first three quarters of Lennar’s

 



 

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current fiscal year, and CalAtlantic’s historical unaudited consolidated statement of operations for the nine months ended September 30, 2017, which were the first three quarters of CalAtlantic’s current fiscal year.

 

    The unaudited pro forma condensed combined statement of operations for the year ended November 30, 2016 combines Lennar’s historical audited condensed consolidated statement of operations for the year ended as of November 30, 2016, which was Lennar’s most recently completed fiscal year, and CalAtlantic’s historical audited consolidated statement of operations for the year ended December 31, 2016, which was CalAtlantic’s most recently completed fiscal year.

Summary Pro Forma Condensed Combined Financial Data

 

     Nine Months Ended
August 31, 2017
     Year Ended
November 30, 2016
 
(In thousands, except per share amounts)              

Statement of Operations Data:

     

Revenues

     

Homebuilding

   $ 12,264,286        16,129,377  

Financial services

   $ 631,856        775,950  

Rialto

   $ 207,804        233,966  

Multifamily

   $ 291,900        287,441  
  

 

 

    

 

 

 

Total revenues

   $ 13,395,846        17,426,734  
  

 

 

    

 

 

 

Operating earnings (loss):

     

Homebuilding

   $ 1,240,491        2,112,716  

Financial services

   $ 136,923        203,231  

Rialto

   $ (10,497      (16,692

Multifamily

   $ 34,816        71,174  

Corporate general and administrative expenses

   $ 259,017        312,144  
  

 

 

    

 

 

 

Earnings before income taxes

   $ 1,142,716        2,058,285  
  

 

 

    

 

 

 

Net earnings

     763,624        1,379,037  

Net earnings per common share

     

Basic

   $ 2.40        4.54  

Diluted

   $ 2.40        4.36  

Financial Position (Period End):

     

Total assets

   $ 28,369,466     

Debt:

     

Homebuilding

   $ 10,841,955     

Financial services

   $ 872,513     

Rialto

   $ 617,152     

Multifamily

     —       

Stockholders’ equity

   $ 12,695,478     

Total equity

   $ 12,814,570     

Shares outstanding (000s)

     325,482     

Stockholders’ equity per share

   $ 39.01     

Homebuilding Data (including unconsolidated entities):

     

Number of homes delivered

     30,806     

New orders

     34,789     

Backlog of home sales contracts

     17,782     

Backlog dollar value

   $ 7,778,607     

 



 

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UNAUDITED COMPARATIVE PER SHARE DATA

The following table shows Lennar’s and CalAtlantic’s per share data on a historical and pro forma combined basis. The pro forma information is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the Merger had been completed as of the beginning of the periods presented, nor is it necessarily indicative of the future operating results or financial position of the combined company.

Except for the historical information for the year ended November 30, 2016 for Lennar and December 31, 2016 for CalAtlantic, the information in the table is unaudited.

The following comparative per share data for Lennar and for CalAtlantic is derived from the respective historical consolidated financial statements of each of them included in their respective Annual Reports on Form 10-K for the years ended November 30, 2016 and December 31, 2016, respectively, and their respective Quarterly Reports on Form 10-Q for the quarterly periods ended August 31, 2017 and September 30, 2017, respectively, all of which are incorporated by reference into this joint proxy statement/prospectus. The historical book value per share is computed by dividing the total stockholders’ equity by the number of shares of common stock outstanding at the end of the period. The pro forma earnings per share of the combined company is computed by dividing the pro forma income by the pro forma weighted average number of shares outstanding. The pro forma book value per share of the combined company is computed by dividing the total pro forma stockholders’ equity by the pro forma number of shares of common stock outstanding at the end of the period. This information should be read together with the unaudited pro forma combined financial data included under “Unaudited Pro Forma Condensed Combined Financial Statements of Lennar and CalAtlantic” beginning on page F-1 of this joint proxy statement/prospectus.

 

     At or for the Nine
Months Ended
August 31, 2017
     At or for the Year
Ended
November 30, 2016
 

Lennar Corporation—Historical

     

Earnings per share, basic

   $ 2.13      $ 4.13  

Earnings per share, diluted

   $ 2.13      $ 3.93  

Book value per share

   $ 32.11      $ 29.96  
     At or for the Nine
Months Ended
September 30, 2017
     At or for the Year
Ended

December 31, 2016
 

CalAtlantic Group, Inc.—Historical

     

Earnings per share, basic

   $ 2.43      $ 4.09  

Earnings per share, diluted

   $ 2.14      $ 3.60  

Book value per share

   $ 39.28      $ 36.77  

 

     At or for the Nine
Months Ended
August 31, 2017
     At or for the Year
Ended
November 30, 2016
 

Lennar Corporation — Unaudited Pro Forma Combined (1)

     

Earnings per share, basic

   $ 2.40      $ 4.54  

Earnings per share, diluted

   $ 2.40      $ 4.36  

Book value per share

   $ 39.01        N/A  

 



 

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     At or for the Nine
Months Ended
September 30, 2017
     At or for the Year
Ended
December 31, 2016
 

CalAtlantic Group, Inc.—Unaudited Pro Forma Equivalent Per Share Data (2)

     

Earnings per share, basic

   $ 2.13      $ 4.02  

Earnings per share, diluted

   $ 2.13      $ 3.86  

Book value per share

   $ 34.52        N/A  

 

(1) Pro forma earnings per share on a pro forma basis reflects the effect of the additional shares of common stock outstanding as a result of the Merger.
(2) Unaudited pro forma equivalent per share information is computed by multiplying the Lennar unaudited pro forma combined amounts by the exchange ratio (0.885 shares of Lennar Class A common stock for each share of CalAtlantic common stock) so that the per share amounts are equated to the respective values for one share of CalAtlantic common stock.

 



 

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MARKET PRICES AND DIVIDENDS

The table below sets forth, for the calendar quarters indicated, the high and low sales prices per share of CalAtlantic common stock, which trades on the NYSE under the symbol “CAA,” and Lennar Class A and Class B common stock, which trade on the NYSE under the symbol “LEN and “LEN.B,” respectively, as well as the quarterly cash dividends declared per share for the periods indicated. The stock prices prior to November 9, 2017 have not been adjusted for the Lennar Class B stock dividend distributed November 27, 2017.

 

     CalAtlantic Common Stock  
     High      Low      Dividend  

Year Ended December 31, 2015

        

First Quarter

   $ 45.70      $ 32.60        —    

Second Quarter

   $ 45.95      $ 38.95        —    

Third Quarter

   $ 46.75      $ 38.95        —    

Fourth Quarter

   $ 43.24      $ 36.23      $ 0.04  

Year Ended December 31, 2016

        

First Quarter

   $ 37.51      $ 26.97      $ 0.04  

Second Quarter

   $ 38.41      $ 30.89      $ 0.04  

Third Quarter

   $ 40.94      $ 32.86      $ 0.04  

Fourth Quarter

   $ 43.24      $ 30.18      $ 0.04  

Year Ended December 31, 2017

        

First Quarter

   $ 38.37      $ 32.47      $ 0.04  

Second Quarter

   $ 38.58      $ 33.75      $ 0.04  

Third Quarter

   $ 38.63      $ 33.56      $ 0.04  

Fourth Quarter

   $ 57.50      $ 36.43      $ 0.04  

Year Ending December 31, 2018

        

First Quarter (through January 2)

   $ 57.91      $ 56.72     
     Lennar Class A Common Stock  
     High      Low      Dividend  

Year Ended November 30, 2015

        

First Quarter

   $ 51.51      $ 41.25      $ 0.04  

Second Quarter

   $ 53.67      $ 44.76      $ 0.04  

Third Quarter

   $ 56.04      $ 45.78      $ 0.04  

Fourth Quarter

   $ 54.23      $ 46.23      $ 0.04  

Year Ended November 30, 2016

        

First Quarter

   $ 52.49      $ 37.14      $ 0.04  

Second Quarter

   $ 48.96      $ 42.37      $ 0.04  

Third Quarter

   $ 49.60      $ 43.11      $ 0.04  

Fourth Quarter

   $ 47.60      $ 39.68      $ 0.04  

Year Ended November 30, 2017

        

First Quarter

   $ 49.00      $ 41.83      $ 0.04  

Second Quarter

   $ 53.79      $ 49.09      $ 0.04  

Third Quarter

   $ 55.75      $ 50.43      $ 0.04  

Fourth Quarter

   $ 63.15      $ 48.69      $ 0.04  

Year Ending November 30, 2018

        

First Quarter (through January 2)

   $ 64.85      $ 60.67     

 



 

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     Lennar Class B Common Stock  
     High      Low      Dividend  

Year Ended November 30, 2015

        

First Quarter

   $ 41.21      $ 32.75      $ 0.04  

Second Quarter

   $ 42.59      $ 36.14      $ 0.04  

Third Quarter

   $ 46.55      $ 37.61      $ 0.04  

Fourth Quarter

   $ 45.69      $ 38.23      $ 0.04  

Year Ended November 30, 2016

        

First Quarter

   $ 42.70      $ 30.04      $ 0.04  

Second Quarter

   $ 39.30      $ 33.71      $ 0.04  

Third Quarter

   $ 39.93      $ 34.68      $ 0.04  

Fourth Quarter

   $ 38.17      $ 32.09      $ 0.04  

Year Ended November 30, 2017

        

First Quarter

   $ 39.60      $ 33.39      $ 0.04  

Second Quarter

   $ 44.47      $ 39.68      $ 0.04  

Third Quarter

   $ 47.45      $ 41.83      $ 0.04  

Fourth Quarter

   $ 51.90      $ 40.59      $ 0.04  

Year Ending November 30, 2018

        

First Quarter (through January 2)

   $ 52.61      $ 48.44     

The following table presents the closing prices of CalAtlantic common stock and Lennar Class A and Class B common stock on October 27, 2017, the last full trading day prior to the public announcement of the Merger, and January 2, 2018, the most recent practicable trading day before the date of this joint proxy statement/prospectus.

 

     CalAtlantic
Common
Stock
     Lennar
Class A
Common
Stock
     Lennar
Class B
Common
Stock
 

October 27, 2017

   $ 40.45      $ 58.01      $ 49.62  

January 2, 2018

   $ 57.86      $ 64.84      $ 52.61  

CalAtlantic stockholders are advised to obtain current market quotations for CalAtlantic common stock and Lennar Class A and Class B common stock. The market price of Lennar Class A and Class B common stock will fluctuate between the date of this joint proxy statement/prospectus and the completion of the Merger. No assurance can be given concerning the market price of CalAtlantic common stock before the effective date of the Merger. No assurance can be given concerning the market price of Lennar Class A or Class B common stock before or after the effective date of the Merger.

Since December 30, 2015, the CalAtlantic board has declared quarterly cash dividends of $0.04 per share. Under the merger agreement, CalAtlantic has agreed not to declare or pay any dividends, or make any other distributions, to its stockholders other than payments of quarterly cash dividends in the ordinary course in amounts per share no greater than the quarterly cash dividends paid in the prior quarters of fiscal year 2017. In addition, on October 30, 2017, the CalAtlantic board of directors declared a cash dividend of $0.04 per share of CalAtlantic common stock, payable on December 30, 2017 to the holders of record at the close of business on December 15, 2017.

Since October 2008, the Lennar board of directors has declared quarterly cash dividends of $0.04 per share for both its Class A and its Class B common stock. However, each quarter the Lennar board of directors evaluates the decision whether to declare a dividend and the amount of the dividend. Lennar’s debt instruments include provisions that could under some circumstances affect its ability to pay dividends, but none of them is likely to affect Lennar’s ability to continue paying dividends at the current rate. In addition, on October 29, 2017, the Lennar board of directors declared a stock dividend of one share of Class B common stock for each 50 shares of Class A common stock or Class B common stock outstanding, payable on November 27, 2017 to holders of record at the close of business on November 10, 2017.

 



 

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RISK FACTORS

In addition to the other information included or incorporated by reference into this joint proxy statement/prospectus, including the matters addressed in the section titled “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 36, you should carefully consider the following risks before deciding how to vote, or if a CalAtlantic stockholder, whether or not to make a cash election. In addition, you should read and carefully consider the risks associated with each of Lennar and CalAtlantic and their respective businesses. Descriptions of these risks can be found in Lennar’s Annual Report on Form 10-K for the year ended November 30, 2016 and Quarterly Report on Form 10-Q for the quarterly period ended August 31, 2017, and CalAtlantic’s Annual Report on Form 10-K for the year ended December 31, 2016 and Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2017, which are filed with the SEC and incorporated by reference into this joint proxy statement/prospectus. For further information regarding the documents incorporated into this joint proxy statement/prospectus by reference, please see “Where You Can Find More Information” beginning on page 133. Realization of any of the risks described below, any of the events described in the section titled “Cautionary Statement Regarding Forward-Looking Statements” or any of the risks or events described in the documents incorporated by reference could have a material adverse effect on Lennar’s, CalAtlantic’s or the combined company’s businesses, financial conditions, cash flows and results of operations and could result in a decline in the trading prices of Lennar’s Class A and Class  B common stock.

Risks Relating to the Merger

The exchange ratio and the cash consideration are fixed and will not be adjusted in the event of any change in the stock price for either CalAtlantic or Lennar .

At the effective time of the Merger, each share of CalAtlantic common stock issued and outstanding immediately prior to the effective time of the Merger (other than shares of CalAtlantic common stock held in CalAtlantic’s treasury or held by any direct or indirect wholly-owned subsidiary of CalAtlantic, and shares of CalAtlantic common stock held by Lennar or Merger Sub, immediately before the effective time of the Merger) will be converted into and become the right to receive 0.885 shares of Lennar Class A common stock and 0.0177 shares of Lennar Class B common stock, which is referred to as the “equity consideration.” In lieu of receiving the equity consideration, holders of CalAtlantic common stock will have the option to elect to receive cash in the amount of $48.26 per share, without interest, in the Merger, which is referred to as the “cash consideration,” subject to proration to the extent the aggregate cash to be paid to all holders electing to receive cash consideration would exceed $1,162,250,000, which is referred to as the “maximum cash amount.”

Changes in the price of Lennar common stock prior to the Merger will affect the value of the equity consideration that CalAtlantic stockholders may receive on the date of the Merger. The exchange ratio would be adjusted appropriately to fully reflect the effect of any stock dividend (other than the Class B dividend), subdivision, reorganization, reclassification, recapitalization, stock split, reverse stock split, combination, exchange of shares or other similar event with respect to the shares of either CalAtlantic common stock or Lennar common stock prior to the closing of the Merger, if there were such an event.

The prices of Lennar Class A and Class B common stock at the closing of the Merger may vary from their prices on the date the merger agreement was executed, on the date of this joint proxy statement/prospectus and on the date of each stockholder meeting. As a result, the value represented by the exchange ratio will also vary. For example, based on the closing price of Lennar’s stock on the NYSE on October 27, 2017, the last trading day before public announcement of the Merger, of $58.01 for its Class A common stock and $48.65 for its Class B common stock, 0.885 shares of Lennar Class A common stock had a value of $51.34 and 0.0177 shares of Lennar Class B common stock had a value of $0.86 and, based on the closing price of Lennar’s stock on NYSE on January 2, 2018, the latest practicable trading date before the date of this joint proxy statement/prospectus, of $64.84 for its Class A common stock and $52.61 for its Class B common stock, 0.885 shares of Lennar Class A common stock had a value of $57.38 and 0.0177 shares of Lennar Class B common stock had a value of $0.93. In addition, the per share price of Lennar Class A and Class B common stock and CalAtlantic common stock also

 

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could fluctuate after the deadline to make or withdraw cash elections passes, so that the market value of those securities moves from higher to lower, or from lower to higher, than the $48.26 per share that would be paid as cash consideration. These variations could result from changes in the business, operations or prospects of CalAtlantic or Lennar prior to or following the Merger, regulatory considerations, general market and economic conditions and other factors both within and beyond the control of CalAtlantic or Lennar.

The Merger will not be completed until at least five business days after the deadline for making cash elections. Therefore, at the cash election deadline, CalAtlantic stockholders will not know with certainty the value of the equity consideration that they will receive upon completion of the Merger if they do not elect to receive cash or if the cash election is subject to proration.

CalAtlantic stockholders who elect to receive the cash consideration may nonetheless receive a prorated portion of their merger consideration in the form of Lennar stock if the maximum cash amount is exceeded.

Elections to receive the cash consideration by CalAtlantic stockholders will be subject to the proration procedures set forth in the merger agreement to the extent necessary so that CalAtlantic stockholders who elect cash will receive in the aggregate no more than the maximum cash amount in the Merger. Depending on the elections made by all the CalAtlantic stockholders, valid elections for more than the maximum cash amount may be received, in which case CalAtlantic stockholders who validly elected to receive the cash consideration in the Merger will receive a portion of their merger consideration in the form of cash and the remainder in the form of the equity consideration. Stockholders who receive the equity consideration will be subject to a number of risks relating to Lennar and its common stock discussed elsewhere in this “Risk Factors” section and in Lennar’s SEC filings that are incorporated by reference into this joint proxy statement/prospectus.

CalAtlantic and Lennar are subject to various uncertainties and contractual restrictions, including the risk of litigation, while the Merger is pending that may cause disruption from the transaction and may make it more difficult to maintain or develop relationships with current or potential employees, suppliers or customers.

Uncertainty about the effect of the Merger on employees, suppliers and customers may have an adverse effect on CalAtlantic and Lennar. These uncertainties may impair CalAtlantic’s and Lennar’s ability to attract, retain and motivate key personnel until the Merger is completed and for a period of time thereafter, and could cause customers, suppliers and others that deal with CalAtlantic and Lennar to seek to change existing or potential business relationships with them.

Employee retention and recruitment may be particularly challenging for CalAtlantic prior to the completion of the Merger, as employees and prospective employees may experience uncertainty about their future roles with Lennar. If key employees depart or prospective key employees fail to accept employment with either company because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with Lennar, CalAtlantic’s and Lennar’s financial results could be adversely affected. Furthermore, Lennar’s operational and financial performance following the Merger could be adversely affected if it is unable to retain key employees and skilled workers of CalAtlantic or Lennar. The loss of the services of key employees and skilled workers and their experience and knowledge regarding CalAtlantic’s or Lennar’s businesses could adversely affect Lennar’s future operating results and its successful ongoing operation of the combined business.

The pursuit of the Merger and the preparation for the integration may place a significant burden on each company’s management and internal resources. The diversion of management attention away from day-to-day business concerns and any difficulties encountered in the transition and integration process could adversely affect CalAtlantic’s and Lennar’s financial results.

In addition, the merger agreement restricts CalAtlantic, without Lennar’s consent, from making certain acquisitions and taking other specified actions until the Merger occurs or the merger agreement terminates. These restrictions may prevent CalAtlantic from pursuing otherwise attractive business opportunities and making other changes to its business prior to completion of the Merger or termination of the merger agreement. See the section entitled “The Merger Agreement—Conduct of Business Prior to Closing” beginning on page 87 of this joint proxy statement/prospectus.

 

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Lennar may have difficulty integrating the CalAtlantic business and anticipated benefits of combining CalAtlantic and Lennar may not be realized.

CalAtlantic and Lennar entered into the merger agreement with the expectation that the Merger will result in various benefits, including, among other matters, operating efficiencies. Achieving the anticipated benefits of the Merger is subject to a number of uncertainties, including whether the businesses of CalAtlantic and Lennar can be integrated in an efficient and effective manner.

CalAtlantic is much larger than any company that Lennar has ever previously acquired. In order to benefit from the cost savings and other potential benefits of the Merger, Lennar will have to integrate many aspects of CalAtlantic’s activities into Lennar. This will be a major task. It is possible that the integration process could take longer than anticipated and could result in the loss of valuable employees, the disruption of each company’s ongoing businesses, processes and systems or inconsistencies in standards, controls, procedures, practices, policies and compensation arrangements, any of which could adversely affect Lennar’s ability to achieve the anticipated benefits of the Merger. Lennar’s results of operations could also be adversely affected by occurrences or events at CalAtlantic or Lennar before the effective time of the Merger. The companies may have difficulty addressing possible differences in corporate cultures and management philosophies. The integration process is subject to a number of uncertainties, and no assurance can be given that the anticipated benefits will be realized or, if realized, the timing of their realization. Failure to achieve these anticipated benefits could result in increased costs or decreases in the amount of expected net income and could adversely affect Lennar’s future business, financial condition, operating results and prospects.

Completion of the transactions may trigger assignment, change of control or other provisions in certain agreements or licenses to which CalAtlantic is a party.

The completion of the transactions may trigger assignment, change of control or other provisions in certain agreements or licenses to which CalAtlantic is a party. If CalAtlantic and Lennar are unable to negotiate waivers of those provisions in CalAtlantic’s agreements or licenses, the counterparties may exercise their rights and remedies under the agreements, possibly terminating the agreements or licenses or seeking monetary damages. Even if CalAtlantic and Lennar are able to negotiate waivers, the counterparties may require fees for such waivers or seek to renegotiate the agreements and licenses on terms less favorable to Lennar or the surviving corporation.

Failure to complete the Merger could negatively impact the stock prices and the future business and financial results of CalAtlantic and Lennar.

If the Merger is not completed, the ongoing businesses of CalAtlantic and/or Lennar may be adversely affected, and CalAtlantic and Lennar will be subject to a number of risks, including the following:

 

    being required to pay a termination fee or expense reimbursement to the other party under certain circumstances provided in the merger agreement;

 

    having to pay certain costs relating to the Merger, such as legal, accounting, financial advisor and printing fees;

 

    declines in the stock prices of CalAtlantic common stock and Lennar common stock to the extent that the current market prices reflect a market assumption that the Merger will be completed; and

 

    results of having the focus of each company’s management on the Merger, which may divert management’s attention and potentially cause such company not to pursue other opportunities that could have been beneficial to such company.

If the Merger is not completed, CalAtlantic and Lennar cannot assure their stockholders that these risks will not materialize and will not materially adversely affect the business, financial results and stock prices of CalAtlantic or Lennar.

 

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The pro forma financial statements included in this joint proxy statement/prospectus are presented for illustrative purposes only and may not be an indication of Lennar’s financial condition or results of operations following the Merger.

The pro forma financial statements contained in this joint proxy statement/prospectus are presented for illustrative purposes only. They are based on historical results of Lennar and CalAtlantic, not on anticipated post-Merger results. They include various adjustments, assumptions and preliminary estimates and may not be an indication of what the combined financial condition or results of operations of the two companies would have been if they had been a single company throughout the periods to which the pro forma financial statements relate. See the section entitled “Selected Unaudited Pro Forma Condensed Combined Financial Statements” beginning on page 18 of this joint proxy statement/prospectus. The actual financial condition and results of operations of Lennar following the Merger may not be consistent with, or evident from, these pro forma financial statements.

The Merger is subject to certain conditions, including conditions that may not be satisfied or completed on a timely basis, or at all.

Consummation of the Merger is subject to certain closing conditions which make the closing and timing of the Merger uncertain. The conditions include, among others, obtaining the requisite stockholder approvals from the CalAtlantic and Lennar stockholders, the effectiveness of the registration statement to which this joint proxy statement/prospectus relates, the authorization and approval for listing on the NYSE of the shares of Lennar common stock to be issued in the Merger subject to official notice of issuance, and the other conditions set forth in the merger agreement. See “The Merger Agreement—Conditions to Completion of the Merger” beginning on page 84.

Although Lennar and CalAtlantic have agreed in the merger agreement to use their reasonable best efforts to obtain the requisite approvals and consents, there can be no assurance that these approvals and consents will be obtained. Even if obtained, these approvals and consents may be obtained later than anticipated. Lennar and CalAtlantic will be subject to business uncertainties and contractual restrictions while the Merger is pending.

Any delay in completing the Merger may reduce the benefits expected to be achieved thereunder.

The Merger is subject to a number of conditions beyond CalAtlantic’s and Lennar’s control that may prevent, delay or otherwise materially adversely affect its completion. CalAtlantic and Lennar cannot predict whether and when these conditions will be satisfied. Any delay in completing the Merger could cause Lennar not to realize some of the synergies that CalAtlantic and Lennar expect to achieve if the Merger is successfully completed within its expected time frame. See “The Merger Agreement—Conditions to Completion of the Merger” beginning on page 84.

CalAtlantic’s executive officers and directors have interests in the Merger that may be different from, or in addition to, the interests of CalAtlantic stockholders generally.

CalAtlantic’s executive officers and directors have interests in the Merger that may be different from, or in addition to, the interests of CalAtlantic stockholders generally. CalAtlantic’s executive officers negotiated the terms of the merger agreement. The executive officers of CalAtlantic have arrangements with CalAtlantic that provide for a cash retention bonus if the Merger is consummated and severance benefits if their employment is terminated under certain circumstances following the completion of the Merger. CalAtlantic’s executive officers and directors also have rights to indemnification and directors’ and officers’ liability insurance that will survive completion of the Merger.

The CalAtlantic board of directors was aware of these interests at the time it approved the Merger and the transactions contemplated by the merger agreement. These interests may cause CalAtlantic’s directors and executive officers to view the CalAtlantic Merger Proposal differently and more favorably than you may view it. See “The Merger—Interests of CalAtlantic Directors and Executive Officers in the Merger” beginning on page 68 of this joint proxy statement/prospectus, for more information.

 

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The merger agreement contains provisions that could discourage a potential competing acquiror of CalAtlantic.

The merger agreement contains “no shop” provisions that, subject to limited exceptions, restrict CalAtlantic’s ability to solicit, initiate, or knowingly encourage or knowingly facilitate competing third-party proposals for the acquisition of CalAtlantic’s stock or assets. In addition, Lennar generally has an opportunity to agree to modify the terms of the merger agreement in response to any competing acquisition proposals that the CalAtlantic board of directors determines to be superior to the Merger. If CalAtlantic terminates the merger agreement in order to enter into a superior transaction, it will have to pay Lennar a termination fee of $178.7 million. See “The Merger Agreement—No Solicitation; Notice of Proposals” beginning on page 90 of this joint proxy statement/prospectus and “The Merger Agreement—Effect of Termination; Termination Fees” beginning on page 96 of this joint proxy statement/prospectus.

These provisions could discourage a potential third-party acquiror that might have an interest in acquiring all or a significant portion of CalAtlantic from considering or proposing that acquisition, even if it were prepared to pay consideration with a higher per share cash or market value than the market value proposed to be received or realized in the Merger. In particular, CalAtlantic’s need to pay a termination fee might reduce the amount a potential third-party acquiror would be willing to pay to acquire CalAtlantic because of the added expense of the termination fee that may become payable.

If the merger agreement is terminated and CalAtlantic determines to seek another business combination, it may not be able to negotiate a transaction with another party on terms comparable to, or better than, the terms of the Merger.

The shares of Lennar common stock that may be received by CalAtlantic stockholders as a result of the Merger will have different rights from the shares of CalAtlantic common stock.

Upon completion of the Merger, holders of most of the shares of CalAtlantic common stock will become holders of shares of Lennar common stock and their rights as stockholders will be governed by Lennar’s certificate of incorporation and bylaws, as well as Delaware law. The rights of holders of shares of Lennar’s common stock differ from those of CalAtlantic in important respects and, accordingly, the holders’ ability to benefit from results of Lennar’s operations may be different from their pre-Merger ability to benefit from results of CalAtlantic’s operations. See the section entitled “Comparison of Rights of Stockholders of CalAtlantic and Lennar” beginning on page 123 of this joint proxy statement/prospectus.

CalAtlantic and Lennar stockholders do not have dissenters’ or appraisal rights in the Merger.

Dissenters’ rights are statutory rights that, if applicable, enable stockholders to dissent from an extraordinary transaction, such as a merger, and to demand that the corporation pay the fair value for their shares as determined by a court in a judicial proceeding instead of receiving the consideration being paid or issued to stockholders in connection with the extraordinary transaction. Under the DGCL, a stockholder does not have the right to dissent from a merger as to shares that are listed on a national securities exchange unless the stockholders are required to receive in exchange for their shares of stock something other than shares of stock of a company that is publicly listed on a securities exchange or held by more than 2,000 holders of record and cash in lieu of fractional shares. Because CalAtlantic stockholders will receive Lennar stock that is listed on the NYSE unless they elect to receive cash, they will not be entitled to exercise dissenters rights or otherwise to receive the appraised value of their CalAtlantic stock.

The fairness opinion obtained by the board of director of CalAtlantic from its financial advisor will not reflect changes in circumstances between signing the merger agreement and the completion of the Merger.

The fairness opinion that the CalAtlantic board of directors received from J.P. Morgan, CalAtlantic’s financial advisor, was dated October 29, 2017, and speaks as of that date. The CalAtlantic board of directors has not obtained or arranged to obtain an updated fairness opinion as of the date of this joint proxy statement/prospectus or as of the

 

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effective time of the Merger. Changes in the operations and prospects of CalAtlantic or Lennar, general market and economic conditions and other factors that may be beyond the control of CalAtlantic and Lennar, and on which the fairness opinion was based, may change, and that may alter the value of CalAtlantic or Lennar or the prices of shares of CalAtlantic common stock or Lennar common stock by the effective time of the Merger. The opinion does not speak as of the time the Merger will be completed or as of any date other than the date of the opinion. Because CalAtlantic does not anticipate asking J.P. Morgan to update its opinion, the October 29, 2017 opinion does not address the fairness of the exchange ratio or the cash consideration, from a financial point of view, at the time the Merger will be completed. The opinion is included as Annex C to this joint proxy statement/prospectus. For a description of the opinion that the CalAtlantic board of directors received from J.P. Morgan and a summary of the material financial analyses they provided to the CalAtlantic board of directors in connection with rendering such opinion, please refer to “The Merger—Opinion of CalAtlantic’s Financial Advisor” beginning on page 57 of this joint proxy statement/prospectus. For a description of the other factors considered by the board of directors of CalAtlantic in determining to approve the merger agreement and the Merger, please refer to “The Merger—CalAtlantic Board Recommendation and Its Reasons for the Merger” beginning on page 54 of this joint proxy statement/prospectus.

CalAtlantic and Lennar may incur substantial unexpected transaction fees and merger-related costs in connection with the Merger.

CalAtlantic and Lennar expect to incur a number of non-recurring expenses, totaling approximately $70 million, associated with completing the Merger, including investment banking and legal fees, and the costs and expenses of filing, printing and mailing this joint proxy statement/prospectus. Substantial additional costs will be incurred in the integration of the businesses of CalAtlantic and Lennar. Although it is expected that the elimination of certain duplicative costs and other cost savings, as well as the realization of other efficiencies related to the integration of the two businesses, will offset the transaction and merger-related costs over time, this net benefit may not be achieved as rapidly as expected, or at all. Further, if the Merger is not completed, CalAtlantic and Lennar would have to recognize many of these expenses without realizing the expected benefits of the Merger.

The market price of Lennar Class A and Class B common stock after the Merger may be affected by factors different from those affecting the shares of CalAtlantic common stock currently.

Upon completion of the Merger, except for holders receiving the cash consideration for all their CalAtlantic shares, holders of shares of CalAtlantic common stock will become holders of shares of Lennar Class A and Class B common stock. The shares of Lennar common stock differ from those of CalAtlantic common stock in important respects and, accordingly, the results of operations of Lennar and the market price of its shares of Class A and Class B common stock following the Merger may be affected by factors different from those currently affecting the independent results of operations of CalAtlantic. See “Comparison of Rights of Stockholders of CalAtlantic and Lennar” beginning on page 123 of this joint proxy statement/prospectus.

If the Merger does not qualify as a reorganization under Section 368(a) of the Code, CalAtlantic and the stockholders of CalAtlantic may be required to pay substantial U.S. federal income taxes.

It is a condition to CalAtlantic’s completion of the Merger that Gibson Dunn, tax counsel to CalAtlantic, will have delivered an opinion to CalAtlantic, dated as of the closing date of the Merger, to the effect that the Merger will be treated for U.S. federal income tax purposes as a “reorganization” within the meaning of Section 368(a) of the Code. This opinion will be based on certain assumptions and representations as to factual matters from CalAtlantic and Lennar, as well as certain covenants and undertakings by CalAtlantic and Lennar. If any of the assumptions, representations, covenants or undertakings is incorrect, incomplete or inaccurate or is violated in any material respect, the validity of the conclusions reached by counsel in its opinion would be jeopardized. Additionally, an opinion of counsel is not binding on the Internal Revenue Service, which we refer to as the “IRS,” or any court, so there can be no certainty that the IRS will not challenge the conclusions reflected in the opinion or that a court will not sustain

 

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such a challenge. If the IRS or a court determines that the Merger should not be treated as a “reorganization,” a holder of CalAtlantic common stock that is a U.S. holder (as defined in the section entitled “Certain U.S. Federal Income Tax Considerations” beginning on page 75 of this joint proxy statement/prospectus ) would generally recognize gain or loss upon the exchange of CalAtlantic common stock for Lennar Class A and Class B common stock pursuant to the Merger. In addition, if the Merger is not treated as a “reorganization,” CalAtlantic (and Lennar, as its parent) would recognize gain, measured generally by the excess of the fair market value of its assets over its adjusted tax basis in such assets.

Holders of CalAtlantic and Lennar common stock will have a reduced ownership and voting interest after the Merger and will exercise less influence over management.

Holders of CalAtlantic common stock and Lennar Class A and Class B common stock currently have the right to vote in the election of the board of directors and on other matters affecting CalAtlantic and Lennar, respectively. Upon the completion of the Merger, each CalAtlantic stockholder who receives shares of Lennar common stock will become a stockholder of Lennar with a percentage ownership of Lennar that is smaller than the stockholder’s percentage ownership of CalAtlantic. It is currently expected that the former stockholders of CalAtlantic as a group will receive shares in the Merger constituting approximately 26% of the shares of Lennar common stock on a fully-diluted basis immediately after the Merger, assuming the aggregate cash consideration to be paid to CalAtlantic stockholders equals the maximum cash amount. As a result, current stockholders of Lennar as a group will own approximately 74% of the shares of Lennar common stock on a fully-diluted basis immediately after the Merger. Because of this, individual CalAtlantic and Lennar stockholders may have less influence on the management and policies of Lennar following the Merger than they now have on the management and policies of CalAtlantic and Lennar, respectively.

The Merger will significantly increase the ratio of Lennar’s homebuilding debt to its total capital, net of cash.

Lennar will incur or become subject to a substantial amount of additional debt as a result of the Merger. It has sold $1.2 billion of debt securities primarily to finance the more than $1.16 billion it will pay to CalAtlantic stockholders who exercise (or are deemed to exercise) the cash election. See “The Merger—Financing Related to the Merger.” In addition, the surviving corporation, which will be a wholly-owned subsidiary of Lennar, will become subject to CalAtlantic’s homebuilding debt, which at September 30, 2017 totaled $3.8 billion. Lennar estimates that the Merger will increase the ratio of its consolidated homebuilding debt to total capital, net of cash from its August 31, 2017 level of 39.6% to a pro forma level of 45.5%. To the extent cash flows of the merged companies are less than anticipated, Lennar may not be able to reduce the ratio of its consolidated homebuilding debt to total capital, net of cash until well after the end of fiscal year 2019, if it is ever able to do that.

The Merger will add a substantial amount of goodwill to Lennar’s balance sheet.

Because the price Lennar will be deemed to pay for the net assets of CalAtlantic for accounting purposes will depend on the value of the Class A and Class B common stock when the Merger takes place, and neither those stock prices nor the value of the CalAtlantic assets Lennar will acquire in the Merger will be known until the Merger takes place, Lennar will not know until after the Merger takes place the amount by which for accounting purposes the amount Lennar pays will exceed the net value of the assets Merger Sub receives and the liabilities Merger Sub assumes in the Merger ( i.e. , the portion of the deemed purchase price that will be treated as purchasing goodwill). However, Lennar estimates that if the value of the Class A common stock at the time of the Merger is $62.36 per share and the value of the Class B common stock at the time of the Merger is $49.47, the respective prices of such shares at the close of trading on December 18, 2017, the Merger would result in Lennar’s adding approximately $3.4 billion to the goodwill carried on its balance sheet. If it is determined in the future that the profits generated by the assets acquired in the Merger are not sufficient to justify that goodwill, Lennar will have to write off some or all of it, and to charge the amount written off against its earnings.

 

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The amount of the merger consideration Lennar agreed to pay in the Merger was influenced by its assumption that it will be able to achieve significant cost savings as a result of the Merger.

Lennar’s willingness to agree to the equity consideration and cash consideration reflected in the merger agreement was based in substantial part on an analysis by Lennar’s management which concluded, among other things, that Lennar would be able to accomplish substantial annual savings in selling, general and administrative costs and in operating costs following the Merger. Although Lennar’s management was previously able to achieve its anticipated cost savings with regard to homebuilding activities of WCI Communities, Inc., which Lennar acquired in February 2017, CalAtlantic is much larger than WCI Communities, Inc. or any other company Lennar has ever acquired. If Lennar is not able to accomplish significant cost savings with regard to development of the CalAtlantic properties, and with regard to some of the properties or companies Lennar already owns, Lennar may not be able to generate sufficient Merger-related revenues to justify the cost of the Merger to Lennar.

Risks Regarding an Investment in Lennar

All of Lennar’s businesses are subject to risks.

Lennar is engaged in several businesses. Although the principal source of its revenues and income are its homebuilding business, Lennar is also engaged in mortgage lending, originating commercial mortgage loans for sale into securitizations, and other real estate related services, managing and advising funds and entities that invest in real estate related assets, developing multifamily residential projects and investing in multi-use real estate developments, as well as a number of businesses related to those activities. Each of Lennar’s businesses is subject to risks and uncertainties, most, but not all, of which affect many companies engaged in the businesses in which Lennar is engaged. These risks are discussed in detail in Lennar’s Annual Report on Form 10-K for the year ended November 30, 2016, which is incorporated by reference into this joint proxy statement/prospectus.

Lennar has a class of common stock that entitles holders to ten votes per share.

The stock Lennar has agreed to issue to CalAtlantic stockholders in the Merger is primarily Class A common stock. The Class A common stock entitles the holders to one vote per share. Lennar also has outstanding Class B common stock, which is substantially identical to the Class A common stock, except that the Class B common stock entitles the holders to ten votes per share. Although Lennar has almost six times as many shares of Class A common stock outstanding as it has outstanding shares of Class B common stock, the ten votes per share give the Lennar Class B stockholders voting control of Lennar.

Lennar has a stockholder who can exercise significant influence over matters that are brought to a vote of its stockholders.

Stuart Miller, Lennar’s Chief Executive Officer and a director, has voting control, through personal holdings and holdings by family-owned entities, of Lennar Class B stock and, to a lesser extent, Lennar Class A common stock, that, based on the shares of Lennar stock that are expected to be outstanding as of November 30, 2017, enables Mr. Miller to cast 39.0% of the votes that can be cast by the holders of both classes of Lennar common stock combined (33.0% after the anticipated issuance of shares in connection with the Merger). That effectively gives Mr. Miller the power to control the election of Lennar directors and the approval of most matters that are presented to its stockholders. Mr. Miller’s voting power might discourage someone from seeking to acquire Lennar or from making a significant equity investment in Lennar, even if Lennar needed the investment to meet its obligations or to operate its businesses. Also, because of his voting power, Mr. Miller could potentially cause Lennar common stockholders to approve actions that are contrary to the desires of most of Lennar’s other stockholders.

 

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Lennar has a substantial amount of indebtedness, and will incur or become subject to substantial additional debt as a result of the Merger. This may have an adverse effect on its businesses or limit its ability to take advantage of business, strategic or financing opportunities.

As of August 31, 2017, Lennar’s consolidated debt, net of debt issuance costs and excluding amounts outstanding under its credit facilities, was approximately $5.5 billion. It has incurred approximately $1.2 billion of debt in connection with the Merger and will become subject to approximately $3.8 billion of pre-Merger CalAtlantic homebuilding debt. Neither the indentures governing Lennar’s senior notes nor the indentures governing the CalAtlantic debt securities restrict Lennar’s future incurrence of additional secured or unsecured debt, and the agreement governing Lennar’s principal credit facility allows it to incur a substantial amount of future unsecured debt. Lennar’s reliance on debt to help support its operations exposes it to a number of risks, including:

 

    it may be particularly vulnerable to adverse general economic or homebuilding industry conditions;

 

    it may find it difficult, or may be unable, to obtain financing to fund future working capital, capital expenditures and other requirements that would be in its best long-term interests;

 

    its need to dedicate a substantial portion of its cash flow from operations to the payment of principal and interest on its debt reduces the cash flow available to fund operations and investments or for dividends or share repurchases;

 

    it may be put at a competitive disadvantage relative to other companies engaged in similar businesses that are less leveraged; and

 

    it may have to sell debt or equity securities or to sell some of its important assets, possibly on unfavorable terms, in order to meet its debt repayment obligations.

The Lennar board can at any time cause Lennar to stop paying dividends

For a number of years, Lennar has paid dividends of $0.16 per share per year with regard to its Class A and Class B common stock. However, the Lennar board may at any time cause Lennar to reduce the dividend or stop paying dividends.

Risks Relating to the Combined Company Following the Merger

If completed, the Merger may not achieve its intended results, and Lennar and CalAtlantic may have difficulty integrating their operations.

Lennar and CalAtlantic entered into the merger agreement with the expectation that the Merger will result in various benefits, including, among other things, expanding Lennar’s asset base and creating synergies. Achieving the anticipated benefits of the Merger is subject to a number of uncertainties, including whether the businesses of Lennar and CalAtlantic can be integrated in an efficient and effective manner.

It is possible that the integration process could take longer than anticipated and could result in the loss of valuable employees and the disruption of CalAtlantic’s ongoing businesses or that inconsistencies in business methods could adversely affect Lennar’s ability to achieve the anticipated benefits of the Merger. Lennar’s future results of operations could also be adversely affected by issues attributable to CalAtlantic’s operations that result from events or actions that occur prior to the Merger. The companies may have difficulty addressing possible differences in corporate cultures and management philosophies. The integration process is subject to a number of uncertainties, and no assurance can be given that the anticipated benefits will be realized or, if realized, that they will be realized within the anticipated time. Failure to achieve these anticipated benefits could result in increased costs or decreases in the revenues from CalAtlantic’s business from those expected and could adversely affect the combined company’s future business or operating results.

 

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The market price of the shares of the combined company and the results of operations of the combined company after the Merger may be affected by factors different from those affecting CalAtlantic or Lennar currently.

The businesses of Lennar and CalAtlantic differ in some respects and, accordingly, Lennar’s results of operations and the market price of its Class A common stock and Class B common stock following the Merger may be affected by factors different from those currently affecting the independent results of operations and market prices of Lennar and CalAtlantic. For a discussion of the businesses of Lennar and CalAtlantic and of certain factors to consider in connection with those businesses, see the documents incorporated by reference into this document and referred to in “Where You Can Find More Information” beginning on page 133.

The combined company is expected to incur expenses related to the integration of Lennar and CalAtlantic.

Lennar is expected to incur expenses in connection with the integration of CalAtlantic into Lennar. There are a large number of processes, policies, procedures, operations, technologies and systems that must be converted, including purchasing, accounting and finance, sales, billing, payroll, pricing, revenue management, maintenance, marketing and employee benefits. While Lennar and CalAtlantic have assumed that a certain level of expenses will be incurred, there are factors beyond their control that could affect the total amount or the timing of the integration expenses. Moreover, many of the expenses that will be incurred are, by their nature, difficult to estimate accurately. To the extent they exceed what is currently anticipated, that could adversely affect Lennar’s operating results for periods following completion of the Merger.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This joint proxy statement/prospectus and the documents incorporated by reference into it include “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act and Section 21E of the Exchange Act. The statements contained in this joint proxy statement/prospectus that are not historical facts are forward-looking statements. They represent Lennar and CalAtlantic management’s beliefs and assumptions based on currently available information. These statements may be made directly in this joint proxy statement/prospectus or may be incorporated by reference to other documents and may include statements for periods after completion of the Merger. The forward-looking statements relate to, among other things, outlooks or expectations for earnings, revenues, expenses, asset quality or other future financial or business performance, strategies or expectations, or the effect of legal, or regulatory matters on business, results of operations or financial condition, and include, among others:

 

    statements about the expected benefits of the proposed Merger, including expected future financial and operating benefits;

 

    statements about Lennar’s and CalAtlantic’s plans, objectives, expectations and intentions, and the expected timing of completion of the Merger; and

 

    other statements that are not historical facts, which can be identified by the use of forward-looking terminology such as the words “may,” “will,” “could,” “should,” “would,” “expect,” “plan,” “project,” “intend,” “anticipate,” “believe,” “estimate,” “forecast,” “predict,” “potential,” “pursue,” “target” or “continue,” the negative of such terms or variations thereon, or other comparable terminology, or by discussions of strategy or trends.

These forward-looking statements represent Lennar’s and CalAtlantic’s current intentions, plans, expectations, assumptions and beliefs about future events, but they are subject to risks and uncertainties. Many of these factors are outside the control of Lennar and CalAtlantic and could cause actual results to differ materially from the expected results expressed or implied by the forward-looking statements. Some factors, risks and uncertainties related to the Merger that could cause actual results to differ include:

 

    the need to obtain certain CalAtlantic and Lennar stockholder approvals in order to complete the Merger;

 

    the risk that a condition to closing of the Merger may not be satisfied or waived;

 

    the risk of delay in consummating the Merger and the risk that the Merger may involve unexpected costs or liabilities;

 

    the risk that CalAtlantic’s or Lennar’s business may suffer as a result of the uncertainty surrounding the Merger;

 

    the risk that CalAtlantic or Lennar may lose management personnel and other key employees due to the Merger and be unable to attract and retain such personnel and employees;

 

    the risk that the restrictions in the merger agreement on CalAtlantic’s business and operations may prevent CalAtlantic from pursuing otherwise attractive business opportunities and making other changes to its business;

 

    the costs and outcome of any legal proceedings relating to the Merger;

 

    the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement;

 

    the risk that the businesses will not be integrated successfully;

 

    the risk that cost savings and any other synergies expected from the Merger may not be fully realized or may take longer to realize than expected;

 

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    the effect of the announcement or pendency of the transactions contemplated by the merger agreement on CalAtlantic’s or Lennar’s ability to develop or maintain relationships with its customers, suppliers and others with whom it does business;

 

    risks related to the diversion of management’s attention from CalAtlantic’s or Lennar’s ongoing business operations;

 

    other risks to consummation of the Merger;

 

    risks inherent in Lennar’s and CalAtlantic’s businesses that are discussed in Lennar’s and CalAtlantic’s most recent Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, respectively, and in other Lennar and CalAtlantic reports on file with the SEC, which discussions are incorporated by reference into this joint proxy statement/prospectus;

 

    factors discussed in Lennar’s and CalAtlantic’s most recent Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, and in other Lennar and CalAtlantic reports on file with the SEC, that could cause actual results to differ materially from those anticipated by forward looking statements in those reports, which discussions are incorporated by reference into this joint proxy statement/prospectus; and

 

    risks set forth in the section titled “Risk Factors” beginning on page 26.

You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this joint proxy statement/prospectus, or in the case of a document incorporated by reference, as of the date of that document. Except as required by law, neither Lennar nor CalAtlantic undertakes any obligation to publicly update or release any revisions to these forward-looking statements to reflect any events or circumstances after the date that they were made or to reflect the occurrence of unanticipated events.

Additional factors, risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in reports filed with the SEC by Lennar and CalAtlantic. See “Where You Can Find More Information” beginning on page 133 for a list of the documents incorporated by reference.

 

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THE MERGER

The following is a discussion of the Merger and the material terms of the merger agreement. You are urged to read carefully the merger agreement in its entirety, a copy of which is attached as Annex A to this joint proxy statement/prospectus and incorporated by reference herein.

Background to the Merger

The CalAtlantic board of directors and senior management regularly review and consider CalAtlantic’s business, performance and strategic plan, with the goal of enhancing value for CalAtlantic stockholders. As part of these reviews, the CalAtlantic board and senior management from time to time consider strategic opportunities with third parties, including possible acquisitions, joint ventures and divestitures, and the potential benefits and risks of these transactions. In addition, for a number of years the CalAtlantic board and its predecessors and senior management have held the view that industry consolidation among U.S. homebuilders would benefit U.S. homebuilders in general and, on the right terms, the parties to such consolidation in particular.

On June 14, 2017, MP CA Homes, an affiliate of MatlinPatterson Global Advisers LLC and CalAtlantic’s largest stockholder, completed a sale of shares of CalAtlantic common stock in an underwritten public offering and a concurrent sale to CalAtlantic of shares of CalAtlantic common stock.

On June 16, 2017, David Matlin, the Chief Executive Officer of MatlinPatterson Global Advisers LLC and a director of CalAtlantic, received an unsolicited telephonic call from a representative of Citigroup, Inc., which we refer to as “Citi”, requesting a meeting with Mr. Matlin. The Citi representative did not specify an agenda for the meeting; however, Mr. Matlin frequently met with the Citi representative in the ordinary course of business concerning investments of the investment funds and other affiliates controlled by Mr. Matlin. Mr. Matlin subsequently met in-person with the Citi representative on June 20, 2017. At that meeting the Citi representative asked Mr. Matlin if he might be interested in meeting with the senior management of Lennar the following day because they were in New York City for an industry conference.

On June 21, 2017, Mr. Matlin and another representative of MP CA Homes met in-person with the Citi representative, Stuart Miller, the Chief Executive Officer of Lennar, and Rick Beckwitt, the President of Lennar. At this meeting, Messrs. Miller and Beckwitt and the Citi representative provided their thoughts on the strategic merits for a combination of Lennar and CalAtlantic. Mr. Matlin responded that MP CA Homes was subject to a Stockholders Agreement with CalAtlantic and that any proposal to combine the companies was a matter to be presented to and discussed with the CalAtlantic board, and not with MP CA Homes. However, he indicated that MP CA Homes would be supportive of such a combination if the CalAtlantic board decided to pursue one. After the meeting, Mr. Matlin contacted Larry T. Nicholson, CalAtlantic’s Chief Executive Officer and President and a member of the CalAtlantic board, to notify him of the discussions.

On June 21, 2017, following the meeting with MP CA Homes, Mr. Beckwitt contacted Mr. Nicholson and proposed a dinner meeting. Later that day, Messrs. Miller and Beckwitt and the Citi representative met with Mr. Nicholson, and at the meeting Messrs. Miller and Beckwitt communicated Lennar’s interest in a potential business combination between Lennar and CalAtlantic, including Lennar’s views on the strategic merits of such a combination. They said that Lennar was prepared to do a mostly stock transaction at a premium to the market price of CalAtlantic’s stock. However, they said that Lennar would want discussions of a strategic combination to be exclusively between CalAtlantic and Lennar, that is, that Lennar would not proceed with discussions if CalAtlantic decided to conduct an auction or other sales process. Mr. Nicholson reported this discussion to Scott D. Stowell, CalAtlantic’s Executive Chairman of the board, William L. Jews, CalAtlantic’s Lead Independent Director, and Jeff J. McCall, CalAtlantic’s Executive Vice President and Chief Financial Officer.

On June 22, 2017, Mr. Nicholson told the representative of Citi that CalAtlantic would have an interest depending on the price and that the CalAtlantic board would evaluate the proposal.

 

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Later on June 22, 2017, Mr. Nicholson received a telephone call from Mr. Beckwitt during which Mr. Beckwitt submitted a verbal proposal for Lennar to enter into a business combination transaction with CalAtlantic in a primarily stock transaction at a purchase price of $39.50 per share of CalAtlantic common stock. He discussed the benefits that Lennar believed supported a strategic combination (including the potential size of the combined company, possible synergies from the transaction and each party’s leading market positions). Mr. Nicholson understood from the conversation that Lennar anticipated that there would be no role for CalAtlantic’s senior management team with the combined company. Mr. Beckwitt said that Lennar was prepared to sign a confidentiality agreement and was prepared to move quickly, but again reiterated that Lennar would only proceed on an exclusive basis. Mr. Nicholson informed Mr. Beckwitt that the CalAtlantic board believed that CalAtlantic’s standalone strategy presented significant opportunities to create value for the stockholders, but that he would report the proposal to the CalAtlantic board. Lennar’s proposal represented an approximately 12.4% premium to the closing price per share of CalAtlantic common stock of $35.14 on June 21, 2017, the last full trading day prior to Lennar’s proposal.

On June 27, 2017, the CalAtlantic board held a telephonic meeting to discuss Lennar’s proposal, with an additional member of CalAtlantic senior management attending. After reviewing and considering Lennar’s proposal and certain financial information and other materials, including preliminary materials prepared by J.P. Morgan, at the request of Mr. McCall, which provided a general overview of the homebuilding industry and recent M&A and capital market activity in the industry, matters on which J.P. Morgan was consulted from time to time by the CalAtlantic board, the CalAtlantic board concluded that Lennar’s proposal was inadequate and that continuing to implement CalAtlantic’s standalone strategy was expected to be in the best interests of the stockholders. Also at this meeting, the CalAtlantic board formed an informal exploratory committee (the “Exploratory Committee”), for convenience and expediency in order to assist the CalAtlantic board in managing any future interactions with Lennar and to interface with senior management of CalAtlantic—on behalf of the CalAtlantic board. Bruce A. Choate, Mr. Jews, Mr. Matlin and Norman J. Metcalfe, were appointed to the Exploratory Committee.

On June 30, 2017, Mr. Beckwitt told Mr. Nicholson in a telephone conversation that the Lennar board is supportive of a transaction, and that Lennar had room to move with regard to price if CalAtlantic would engage in negotiations. Mr. Nicholson informed Mr. Beckwitt that there had been a CalAtlantic board call on June 27, 2017, but the board had not decided to hire an investment banker. He said the CalAtlantic board believed that the $39.50 was inadequate, and that it would wait to hear whether Lennar would be interested at a higher price.

On July 6, 2017, Jon Jaffe, the Chief Operating Officer of Lennar, met with Mr. Stowell, and they discussed the benefits to both companies by combining. Mr. Stowell said the CalAtlantic board understood the merits of a combination, but believed that the price that Lennar was proposing was inadequate.

On July 10, 2017, Mr. Beckwitt submitted to Mr. Nicholson a revised verbal proposal for Lennar to enter into a business combination transaction with CalAtlantic in a primarily stock transaction at a purchase price of $40.50 per share of CalAtlantic common stock. Lennar’s revised proposal represented an approximately 13% premium to the closing price per share of CalAtlantic common stock of $35.89 on July 7, 2017, the last full trading day prior to Lennar’s revised proposal.

On July 11, 2017, the Exploratory Committee held a telephonic meeting to discuss Lennar’s revised proposal. After reviewing and discussing Lennar’s proposal, the Exploratory Committee concluded that Lennar’s proposal was inadequate. The Exploratory Committee communicated its decision to Mr. Nicholson.

On July 12, 2017, Mr. Nicholson called Mr. Beckwitt and informed him that the Exploratory Committee had determined that the revised proposal of $40.50 per share was inadequate.

On July 13, 2017, Mr. Beckwitt submitted to Mr. Nicholson a further revised verbal proposal for Lennar to enter into a business combination transaction with CalAtlantic in a primarily stock transaction at a purchase price

 

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of $42.00 per share of CalAtlantic common stock. Lennar’s proposal represented an approximately 15% premium to the closing price per share of CalAtlantic common stock on July 12, 2017, the last full trading day prior to Lennar’s proposal.

On July 14, 2017, the Exploratory Committee held a telephonic meeting to discuss Lennar’s revised proposal and how to respond to Lennar, with members of CalAtlantic senior management attending. After reviewing and discussing the revised proposal, the Exploratory Committee determined to hold another meeting to further discuss Lennar’s proposal and whether to further engage.

On July 14, 2017, Mr. Nicholson informed Mr. Beckwitt that he would not be able to get back to Mr. Beckwitt on the revised proposal until the following week.

On July 17, 2017, the Exploratory Committee held a further telephonic meeting to discuss Lennar’s revised proposal and how to respond to Lennar, with members of CalAtlantic senior management attending. After such discussion, the Exploratory Committee determined that while no decision had been made with respect to a transaction with Lennar and Lennar’s current proposal was viewed as inadequate, additional information was required to better understand Lennar’s proposals, the extent to which Lennar might be willing to raise its price and whether to engage further. The Exploratory Committee authorized CalAtlantic’s senior management to meet with the senior management of Lennar to discuss Lennar’s proposal regarding a potential business combination with CalAtlantic, including potentially sharing recent field budgets, although preliminary, with Lennar.

On July 18, 2017, Mr. Nicholson called Mr. Beckwitt and said that at a meeting the previous day, the Exploratory Committee had authorized CalAtlantic’s senior management to meet with Lennar senior management to review CalAtlantic’s preliminary five year field budgets at a high level in order to show Lennar why its proposed price was inadequate, if Lennar wanted such a meeting.

On July 20, 2017, certain members of CalAtlantic’s senior management met with certain members of Lennar’s senior management to discuss CalAtlantic’s operations and strategy in light of Lennar’s recent proposals. No determination or commitment with respect to a business combination transaction between CalAtlantic and Lennar was made at this meeting.

On July 24, 2017, Mr. Beckwitt called Mr. Nicholson and presented a further revised proposal for Lennar to enter into a business combination transaction with CalAtlantic in a primarily stock transaction at a purchase price of $44.00 per share of CalAtlantic common stock (the “July 24 Proposal”). The July 24 Proposal represented an approximately 16.0% premium to the closing price per share of CalAtlantic common stock of $37.93 on July 21, 2017, the last full trading day prior to Lennar’s submission of the July 24 Proposal. The July 24 Proposal represented an implied exchange ratio of 0.825 shares of Lennar Class A common stock for each share of CalAtlantic stock, based on the $53.33 closing price of Lennar Class A common stock on July 21, 2017.

On July 25, 2017, the CalAtlantic board held a regularly scheduled telephonic meeting, with members of CalAtlantic senior management attending. Members of CalAtlantic senior management provided an update on the July 20, 2017 meeting that they had with members of Lennar’s senior management and the interactions with Lennar to date. The CalAtlantic board discussed the July 24 Proposal and confirmed that it was not embarking on a process to engage in a business combination transaction with Lennar at that time. The CalAtlantic board nonetheless concluded, that in light of Lennar’s further increased proposal, it would be advisable to take additional time and receive input from a financial advisor and legal counsel to evaluate the July 24 Proposal. Also at this meeting, the CalAtlantic board established an advisory committee (the “Advisory Committee”), for convenience and in order to assist the CalAtlantic board in managing any future interactions with Lennar, and if any further proposals were made by Lennar, to assess such proposals and make a recommendation to the CalAtlantic board with respect to such proposals by, and engagement with, Lennar. Messrs. Choate, Jews, Metcalfe and Robert E. Mellor, each of whom was determined to be independent and disinterested, were appointed to the Advisory Committee, and Mr. Choate was selected as Chair of the Advisory Committee. The

 

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Advisory Committee replaced the previously formed Exploratory Committee. The CalAtlantic board authorized the Advisory Committee to engage a financial advisor and legal counsel to assist the Advisory Committee and the CalAtlantic board to assess the July 24 Proposal. The CalAtlantic board further instructed members of CalAtlantic senior management to inform Mr. Beckwitt that the CalAtlantic board was evaluating the July 24 Proposal and had determined to engage financial and legal advisors to assist in such evaluation.

Following the CalAtlantic board meeting, the Advisory Committee considered potential financial advisors, including J.P. Morgan, for possible engagement to assist the Advisory Committee and the CalAtlantic board in the review of the Lennar proposal and related matters, and requested that CalAtlantic’s management collect information on each of the financial advisors. In addition, the Advisory Committee determined to engage Gibson, Dunn & Crutcher LLP, which we refer to as Gibson Dunn, one of CalAtlantic’s regular outside legal advisors, to assist in the evaluation of the Lennar proposal and related matters.

On July 26, 2017, Mr. Nicholson left a message for Mr. Beckwitt in which he said that the CalAtlantic board had determined that it needed more time to review the July 24 Proposal.

On July 27, 2017, CalAtlantic announced its results for the second quarter ended June 30, 2017.

On July 28, 2017, Mr. Nicholson called Mr. Beckwitt and told him that the Advisory Committee had asked CalAtlantic’s senior management to assist them in evaluating CalAtlantic’s standalone value and review of the preliminary field budgets.

On August 1, 2017, the Advisory Committee held a telephonic meeting, with John P. Babel, CalAtlantic’s Executive Vice President, General Counsel and Secretary, and representatives of Gibson Dunn attending. A representative of Gibson Dunn reviewed the fiduciary duties of the Board in light of a potential business combination transaction with Lennar. The Advisory Committee discussed the potential engagement of J.P. Morgan, and various aspects of the July 24 Proposal and the scope of work to be performed by CalAtlantic’s financial advisor. After consideration, the Advisory Committee determined that J.P. Morgan would be selected to perform a preliminary valuation analysis of CalAtlantic and to assist the Advisory Committee and the CalAtlantic board with assessing the July 24 Proposal. J.P. Morgan was selected based on, among other factors, its qualifications, expertise and reputation, including its industry experience advising homebuilding companies on strategic transactions (including Standard Pacific Corp. in its merger with The Ryland Group, Inc.), and its familiarity with CalAtlantic’s affairs, business and operations (including advising CalAtlantic on certain capital markets transactions), and after consideration of its prior relationships with CalAtlantic, MP CA Homes and Lennar. J.P. Morgan was formally engaged by CalAtlantic on September 15, 2017.

On August 2, 2017, Mr. Beckwitt called Mr. Nicholson and said Lennar was still interested in pursuing a combination.

On August 2, 2017, Messrs. Stowell and Nicholson informed Mr. Beckwitt and the representative of Citi, at the instruction of the CalAtlantic board and the Advisory Committee, that CalAtlantic had engaged J.P. Morgan to perform a preliminary valuation analysis of CalAtlantic in light of the July 24 Proposal, and that the July 24 Proposal remained under consideration by the CalAtlantic board. They said that CalAtlantic was not ready to sign a confidentiality agreement. Mr. Beckwitt told Messrs. Stowell and Nicholson that Lennar would not participate if CalAtlantic commenced a sales process.

On August 3, 2017, representatives of Citi contacted representatives of J.P. Morgan and discussed Lennar’s interest in a business combination with CalAtlantic, as well as the strategic benefits of such combination and the conversations that had been had to date between the Lennar management team and the CalAtlantic management team.

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Lennar, the July 24 Proposal and CalAtlantic’s standalone strategy. In the course of these meetings, the Advisory Committee reviewed and assessed, among other factors, CalAtlantic’s internal financial projections prepared by CalAtlantic management (which are summarized in the section entitled “Unaudited Prospective Financial Information—CalAtlantic Management’s Unaudited Prospective Standalone Financial Information and the Synergies” beginning on page 63), CalAtlantic’s operating metrics relative to those of other comparable companies in the U.S. homebuilding industry, CalAtlantic’s quarterly and annual earnings per share results relative to estimated results, Lennar’s historical and prospective operating and financial performance, and illustrative valuation analyses for CalAtlantic and Lennar.

On August 14, 2017, Messrs. Nicholson and Stowell told Mr. Beckwitt and the representative of Citi that CalAtlantic was working with J.P. Morgan and Gibson Dunn to evaluate the Lennar offer against a standalone strategy. They said that CalAtlantic’s management was in the process of reviewing the preliminary field budgets they had previously discussed with Lennar senior management.

On August 17, 2017, the CalAtlantic board held a telephonic meeting, with members of CalAtlantic senior management, and representatives of J.P. Morgan and Gibson Dunn, attending. Messrs. Stowell and Nicholson summarized for the CalAtlantic board the interactions they had had with representatives of Lennar to date. At this meeting, the CalAtlantic board received an update on the Advisory Committee’s process to date and the Advisory Committee noted that it would soon reach a recommendation with respect to the July 24 Proposal. During this meeting, at the request of the CalAtlantic board, representatives of J.P. Morgan provided an overview of, among other matters, J.P. Morgan’s preliminary valuation analysis of each of CalAtlantic and Lennar on a standalone basis, and a preliminary combination analysis based on Lennar’s proposal, taking into account, among other matters, the internal financial projections and discussions with CalAtlantic senior management. A substantially identical presentation by representatives of J.P. Morgan had been presented to and considered by the Advisory Committee at a telephonic meeting of the Advisory Committee held on August 10, 2017, with members of CalAtlantic senior management attending for a portion of the meeting, including a portion of J.P. Morgan’s presentation, and representatives of Gibson Dunn also attending. A portion of J.P. Morgan’s presentation was made during executive session, without Messrs. Stowell and Nicholson or members of management present, during which the CalAtlantic board reviewed the preliminary financial analysis presented by representatives of J.P. Morgan.

On August 19, 2017, the Advisory Committee held a telephonic meeting, with representatives of Gibson Dunn attending, and Mr. Stowell attending for a portion of the meeting. The Advisory Committee discussed, among other matters, the preliminary analysis previously presented by representatives of J.P. Morgan on CalAtlantic’s standalone strategy, including management’s financial projections, and CalAtlantic’s historical and projected performance and the value and risks associated with the standalone strategy and the July 24 Proposal. During executive session without Mr. Stowell present, after discussion and consideration of the information received by it, the Advisory Committee determined that they believed, based on the information presented, that it was in the best interests of CalAtlantic and its stockholders for CalAtlantic to continue to implement its standalone strategy, and therefore to recommend to the CalAtlantic board that CalAtlantic should focus on successfully executing its standalone strategy and take steps to mitigate risks to achieve management’s financial projections, rather than engaging with Lennar at that time regarding a proposed business combination transaction.

On August 20, 2017, Mr. Choate, as Chair of the Advisory Committee, communicated the Advisory Committee’s recommendation to the members of the CalAtlantic board. Mr. Choate’s message noted that the recommendation would be discussed at a previously scheduled in-person meeting of the CalAtlantic board to be held on August 22, 2017.

On August 22, 2017, the CalAtlantic board held an in-person meeting, with members of CalAtlantic senior management and representatives of Gibson Dunn attending in-person, and representatives of J.P. Morgan attending telephonically. During executive session without members of CalAtlantic senior management, and with representatives of J.P. Morgan present telephonically, the CalAtlantic board discussed the recommendation of,

 

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and the matters considered by, the Advisory Committee. Representatives of J.P. Morgan reviewed again its preliminary valuation analysis of each of CalAtlantic and Lennar on a standalone basis, and a preliminary combination analysis based on the July 24 Proposal. During executive session without members of CalAtlantic senior management or representatives of J.P. Morgan attending, the CalAtlantic board deliberated on, among other matters, J.P. Morgan’s preliminary financial analysis, the potential value provided by the July 24 Proposal, the achievability of the internal financial projections and steps that may be taken to de-risk the achievement of the internal financial projections and successfully execute its standalone strategy. The CalAtlantic board also discussed the fact that, at that point in time, Lennar had not provided non-public information to CalAtlantic or provided its internal projections and accordingly, while the valuation analysis of CalAtlantic was informed by internal financial projections, the valuation analysis of Lennar was informed solely by publicly available information. After extensive discussion, the CalAtlantic board determined that, while it had made no decision with respect to a potential business combination transaction with Lennar, it was in the best interests of CalAtlantic stockholders for the CalAtlantic board to obtain additional information from Lennar so that the CalAtlantic board, with the assistance of J.P. Morgan and Gibson Dunn, could better evaluate Lennar’s stock-for-stock proposal. The CalAtlantic board instructed representatives of J.P. Morgan to obtain additional business and financial information from Lennar, to include members of CalAtlantic’s management who could also assess the information in any meeting, and to report back to the CalAtlantic board.

Following the August 22, 2017 meeting of the CalAtlantic board, Mr. Nicholson informed Mr. Beckwitt, at the instruction of the CalAtlantic board, that a final determination with respect to Lennar’s proposal had not been reached by the CalAtlantic board, and that additional information was required for the CalAtlantic board to make a fully informed decision with respect to the July 24 Proposal.

On August 28, 2017, in response to the CalAtlantic board’s request for additional information from Lennar, members of CalAtlantic senior management and representatives of J.P. Morgan had a telephonic meeting with members of Lennar senior management and representatives of Citi, to discuss and review Lennar’s non-public management plan.

On September 3, 2017, the CalAtlantic board held a telephonic meeting to discuss the July 24 Proposal and the non-public information provided by Lennar, with members of CalAtlantic senior management, and representatives of J.P. Morgan and Gibson Dunn, attending. Representatives of J.P. Morgan provided a preliminary combination analysis based on, among other matters, the Lennar management plan and the CalAtlantic internal financial projections. Also during this meeting, members of CalAtlantic senior management reviewed CalAtlantic’s internal financial projections. The CalAtlantic board also discussed other potential strategic transaction partners for CalAtlantic, and the ability of such potential partners to consummate a transaction. During executive session without members of CalAtlantic senior management or representatives of J.P. Morgan present, the CalAtlantic board discussed a potential business combination transaction with Lennar in light of, among other matters, CalAtlantic’s standalone strategy and prospects. An extensive discussion followed on strategic considerations, including whether providing a counterproposal to Lennar’s current proposal may result in a further increase in per share price, and the nature and value of such a counterproposal. Representatives of Gibson Dunn also reviewed the directors’ fiduciary duties in light of a potential business combination transaction with Lennar. After a thorough review and discussion of Lennar’s proposal, the CalAtlantic board determined that it was in the best interests of CalAtlantic stockholders to continue to evaluate Lennar’s proposal and to engage with Lennar with a view towards evaluating the potential terms upon which a business combination transaction may be agreed. The CalAtlantic board further concluded that, having determined to engage with Lennar at that time, the Advisory Committee was no longer necessary and that it would be more efficient and timely for the entire CalAtlantic board to evaluate any business combination transaction with Lennar.

On September 4, 2017, representatives of Gibson Dunn provided an update to representatives of J.P. Morgan on the CalAtlantic board’s proposed response to Lennar. On September 5, 2017, representatives of J.P. Morgan had a discussion with Mr. Stowell and certain members of the CalAtlantic board regarding potential strategies for

 

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responding to Lennar, and the participants on the call agreed, subject to confirmation from the other members of the CalAtlantic board, to submit a counterproposal to Lennar for a purchase price of $48.00 per share of CalAtlantic common stock. Mr. Stowell discussed this proposal with other members of the CalAtlantic board, and after such discussions and confirmation from other members of the CalAtlantic board, Mr. Stowell instructed representatives of J.P. Morgan to contact Citi to submit the counterproposal to Lennar.

Later in the day on September 5, 2017, representatives of J.P. Morgan contacted representatives of Citi to communicate the CalAtlantic counterproposal of $48.00 per share of CalAtlantic common stock. CalAtlantic’s counterproposal represented an approximately 37.5% premium to the closing price per share of CalAtlantic common stock of $34.91 on September 1, 2017, the last full trading day prior to CalAtlantic’s counterproposal. Based on the closing price of the Lennar Class A common stock of $51.76 on September 1, 2017, the $48.00 counterproposal represented an implied exchange ratio of 0.927 shares of Lennar Class A common stock for each share of CalAtlantic stock.

On September 6, 2017, representatives of Citi informed representatives of J.P. Morgan that while Lennar continued to recognize the strategic merits of a business combination transaction with CalAtlantic, Lennar did not accept the CalAtlantic counterproposal and that instead Lennar had reiterated the July 24 Proposal of $44.00 per share of CalAtlantic common stock.

On September 7, 2017, the CalAtlantic board held a telephonic meeting, with members of CalAtlantic senior management, and representatives of J.P. Morgan and Gibson Dunn, attending. The CalAtlantic board discussed, among other matters, the recent interactions with Lennar and Lennar’s proposal, including the exchange ratio of shares of Lennar common stock to be received for each share of CalAtlantic common stock, as implied by Lennar’s proposal for a primarily stock transaction at a purchase price of $44.00 per share of CalAtlantic common stock. Because all members of the CalAtlantic board were not able to attend the meeting, the CalAtlantic board determined that it would reconvene prior to making a determination with respect to Lennar’s proposal.

On September 9, 2017, the CalAtlantic board convened another telephonic meeting, with members of CalAtlantic senior management, and representatives of J.P. Morgan and Gibson Dunn, attending. The CalAtlantic board reviewed those matters previously discussed at the September 7, 2017 meeting. The CalAtlantic board also discussed, with the assistance of the representatives of J.P. Morgan, an evaluation of a business combination with Lennar focused on obtaining a fixed exchange ratio that would be beneficial to the stockholders of CalAtlantic and permit CalAtlantic stockholders to have meaningful participation in the benefits of a combined company, in light of Lennar’s proposal being a primarily stock transaction. Representatives of Gibson Dunn provided an overview of the directors’ fiduciary duties in the context of a primarily stock transaction. After further discussion, the CalAtlantic board determined that the appropriate measure for evaluating Lennar’s stock-for-stock proposal was an exchange ratio and consideration of the pro forma ownership of the combined company that would be held by CalAtlantic stockholders, rather than a nominal price, and further determined to submit a counterproposal to Lennar at a fixed exchange ratio of 0.91 shares of Lennar common stock to be received for each share of CalAtlantic common stock, with an implied pro forma ownership for CalAtlantic stockholders of over 31.0%.

On September 11, 2017, representatives of J.P. Morgan communicated to representatives of Citi, CalAtlantic’s counterproposal of a fixed exchange ratio of 0.91 shares of Lennar common stock per share of CalAtlantic common stock. The closing price per share of CalAtlantic common stock and Lennar Class A common stock on September 8, 2017, the last full trading day prior to CalAtlantic’s counterproposal, was $34.60 and $50.54, respectively. As of such date, the fixed exchange ratio of 0.91 represented an implied price per share of CalAtlantic common stock of approximately $45.99 and a premium of approximately 32.9% to the closing price per share of CalAtlantic common stock on September 8, 2017.

On September 12, 2017, representatives of Citi communicated to representatives of J.P. Morgan that while Lennar remained interested in a business combination transaction with CalAtlantic, Lennar did not accept the

 

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CalAtlantic counterproposal and that instead Lennar reiterated its prior proposal of $44.00 per share of CalAtlantic common stock, which they believed fully valued CalAtlantic common stock. They also communicated that they were considering a stock transaction, but would provide an ability for some cash election. At the request of Mr. Stowell, representatives of J.P. Morgan communicated Lennar’s response to the members of the CalAtlantic board.

From September 12, 2017 to September 14, 2017, members of the CalAtlantic board, along with members of CalAtlantic senior management, and representatives of J.P. Morgan and Gibson Dunn, considered potential responses to Lennar’s rejection of CalAtlantic’s counterproposal and the rationale for structuring a primarily stock transaction, even with a cash election, based on a fixed exchange ratio – rather than nominal price – to ensure the extent to which stockholders of CalAtlantic would be able to participate in the benefits of a combined company. After consideration of these matters and the matters previously presented to and discussed by the CalAtlantic board, the CalAtlantic board instructed representatives of J.P. Morgan to inform Citi that the CalAtlantic board desired a fixed exchange ratio proposal from Lennar before determining whether to proceed with further discussions regarding a business combination transaction.

On September 14, 2017, representatives of J.P. Morgan contacted representatives of Citi to communicate the CalAtlantic board’s desire that Lennar submit a proposal for a potential business combination transaction based on a fixed exchange ratio.

On September 15, 2017, representatives of J.P. Morgan met with representatives of Citi to further clarify Lennar’s proposal and CalAtlantic’s desire that Lennar submit a proposal for a potential business combination transaction based on a fixed exchange ratio.

On September 16, 2017, representatives of Citi contacted representatives of J.P. Morgan to communicate a revised proposal from Lennar. The revised proposal was for mixed consideration consisting of approximately 76 percent Lennar Class A common stock and approximately 24 percent cash, with stock consideration of 0.856 shares of Lennar Class A common stock for each share of CalAtlantic common stock and cash consideration of $41.80 per share of CalAtlantic common stock. Lennar said it wanted to have the right to purchase for cash either the approximately 25.4% of the outstanding CalAtlantic shares owned by MP CA Homes or the Lennar shares that would be issued as consideration for those CalAtlantic shares. Representatives of Citi also noted that on the basis of its revised proposal, Lennar would be amenable to each company performing due diligence on the other in an effort to reach a mutually agreed business combination transaction. Closing prices of CalAtlantic and Lennar common stock on September 15, 2017, were $34.95 and $51.31, respectively. As of such date, the stock consideration of 0.856 shares represented an implied price per share of CalAtlantic common stock of approximately $43.92 and a premium of approximately 25.7% to the price per share of CalAtlantic common stock, and the cash consideration of $41.80 represented a premium of approximately 19.6% to the price per share of CalAtlantic common stock.

On September 17, 2017, the CalAtlantic board held a telephonic meeting to review Lennar’s revised proposal, with members of CalAtlantic senior management, and representatives of J.P. Morgan and Gibson Dunn, attending. Representatives of J.P. Morgan provided an overview of Lennar’s revised proposal and a preliminary comparison to Lennar’s prior proposal of $44.00 per share of CalAtlantic common stock. The CalAtlantic board discussed with representatives of J.P. Morgan and Gibson Dunn that the revised proposal represented a lower implied value per share of CalAtlantic common stock than Lennar’s prior proposal. The CalAtlantic board considered, among other matters, the implied value of Lennar’s revised proposal, the CalAtlantic board’s prior counterproposal of a 0.91 exchange ratio, and the risks and benefits associated with certain responses to Lennar. After further discussion, the CalAtlantic board concluded that Lennar’s revised proposal was inadequate. The CalAtlantic board decided that in view of Lennar’s inadequate proposal, it was in the best interests of CalAtlantic stockholders for CalAtlantic to cease engagement with Lennar at such time regarding a business combination transaction, and to instead continue executing on its standalone strategy. The CalAtlantic board instructed representatives of J.P. Morgan to communicate its decisions to Citi. During a subsequent executive session, without members of CalAtlantic senior

 

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management or representatives of J.P. Morgan present, the CalAtlantic board discussed what steps, if any, were needed to improve CalAtlantic’s ability to execute its standalone strategy. The CalAtlantic board determined to hold a subsequent meeting to review and assess CalAtlantic’s standalone strategy. Mr. Jews was asked to communicate the CalAtlantic board’s desire to have a meeting with management to review the company’s standalone strategy.

Following the telephonic CalAtlantic board meeting, representatives of J.P. Morgan contacted representatives of Citi to communicate the CalAtlantic board’s decision to cease engagement with Lennar regarding a business combination transaction, and to instead continue executing on its standalone strategy.

On September 18, 2017, Mr. Beckwitt contacted a representative of J.P. Morgan and engaged in a general discussion regarding the reasons for the CalAtlantic board’s rejection of Lennar’s revised proposal and its decision to continue executing on its standalone strategy.

After such communication, no further communications were received from Lennar or its representatives until September 24, 2017.

On September 24, 2017, a representative of Citi called Mr. Matlin asking if MP CA Homes would support a business combination transaction between CalAtlantic and Lennar. Mr. Matlin informed the representative of Citi that MP CA Homes would support a transaction at the right price, and only if approved by the CalAtlantic board. Mr. Matlin contacted Mr. Stowell to notify him of the inquiry.

On September 25, 2017, representatives of Citi contacted representatives of J.P. Morgan to inquire whether CalAtlantic would be receptive to an all-stock business combination transaction at an exchange ratio of 0.89 shares of Lennar common stock per share of CalAtlantic common stock. In addition, they communicated that Lennar desired to have discussions with representatives of MP CA Homes to explore creating an option to purchase CalAtlantic shares held by MP CA Homes between the signing and closing of a definitive agreement. The representatives of J.P. Morgan referred the representatives of Citi to the CalAtlantic board’s previous responses to Lennar’s prior proposals and the CalAtlantic board’s decision to terminate discussions with Lennar. Later that day, representatives of Citi contacted representatives of J.P. Morgan to provide a revised proposal on behalf of Lennar for an all-stock business combination transaction at an exchange ratio of 0.91 shares of Lennar common stock per share of CalAtlantic common stock. At the request of Mr. Stowell, representatives of J.P. Morgan communicated Lennar’s proposal to the members of the CalAtlantic board.

On September 26, 2017, Mr. Beckwitt submitted a non-binding indication of interest letter to CalAtlantic and representatives of J.P. Morgan, proposing a business combination transaction at a 0.91 exchange ratio (the “September 26 Proposal”), and indicating an expectation of, among other matters, entering into a mutually satisfactory merger agreement, subject to completion of due diligence and other customary conditions, and assurances of support for the transaction from MP CA Homes and a lock-up agreement. The closing price per share of CalAtlantic common stock and Lennar Class A common stock on September 25, 2017, the last full trading day prior to Lennar’s submission of the September 26 Proposal, was $35.65 and $50.53, respectively. As of such date, the exchange ratio of 0.91 represented an implied price per share of CalAtlantic common stock of approximately $45.98 and a premium of approximately 29.0% to the price per share of CalAtlantic common stock.

On September 27, 2017, the CalAtlantic board held an in-person meeting to review the September 26 Proposal, with members of CalAtlantic senior management and representatives of J.P. Morgan attending in-person and representatives of Gibson Dunn attending telephonically. Representatives of J.P. Morgan provided an overview of the September 26 Proposal, including as compared to Lennar’s previous proposals and to J.P. Morgan’s preliminary analysis of the historical implied exchange ratios based on the relative trading prices of CalAtlantic common stock and Lennar common stock. Representatives of J.P. Morgan also reviewed preliminary analyses of CalAtlantic’s competitive position relative to that of Lennar and other companies in the U.S. homebuilding industry, and the potential value creation and risks associated with the September 26 Proposal

 

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based on, among other factors, CalAtlantic management’s financial projections and synergy estimates. The CalAtlantic board also discussed with representatives of J.P. Morgan other potential strategic transaction partners for the company. Members of CalAtlantic senior management also provided their views on the September 26 Proposal in light of CalAtlantic’s standalone strategy. During executive session, without members of CalAtlantic senior management or representatives of J.P. Morgan present, the CalAtlantic board engaged in extensive discussion regarding the September 26 Proposal including, among other matters, the execution risks associated with a potential business combination transaction and CalAtlantic’s standalone plan and strategy. Also during executive session, the CalAtlantic board discussed the possibility of CalAtlantic providing transaction-related payments to one or more members of CalAtlantic senior management who were members of the pre-CalAtlantic Standard Pacific management team, if CalAtlantic were to proceed with and complete a business combination transaction with Lennar, due to a perceived inequity with the change in control payments that would be received by the members of CalAtlantic senior management who were members of the pre-CalAtlantic Ryland management team, because of legacy change in control arrangements. Representatives of Gibson Dunn provided an overview of the process for negotiating and announcing entry into definitive transaction documentation, including certain terms typically found in merger agreements involving public companies, and the terms proposed by the September 26 Proposal letter. After further discussion, the CalAtlantic board determined, on the basis of the September 26 Proposal, to engage in negotiating a potential business combination transaction with Lennar. Members of the CalAtlantic senior management and representatives of J.P. Morgan then re-joined the meeting and the CalAtlantic board instructed members of the CalAtlantic senior management and representatives of J.P. Morgan and Gibson Dunn to engage in negotiating a potential business combination transaction with Lennar.

On the evening of September 27, 2017, representatives of J.P. Morgan contacted representatives of Citi to communicate the CalAtlantic board’s decision to proceed with mutual due diligence and with negotiating a potential business combination transaction with Lennar based upon the terms of the September 26 Proposal. Also on September 27, 2017, Gibson Dunn distributed an initial draft of a confidentiality agreement, which contained a customary mutual standstill provision, to Lennar’s legal advisor Goodwin Procter LLP, which we refer to as “Goodwin.”

Over the course of the next several days, members of CalAtlantic senior management and representatives of J.P. Morgan and Gibson Dunn engaged in discussions with members of Lennar senior management and representatives of Citi and Goodwin to determine the process for due diligence and negotiations.

On September 30, 2017, Mr. Beckwitt and Mr. Stowell discussed the draft confidentiality agreement and discussed Lennar’s desire to enter into an agreement with MP CA Homes in which MP CA Homes would agree to vote for a business combination if one was approved by the CalAtlantic board and would give Lennar an option to purchase MP CA Homes’ CalAtlantic shares for cash, which would enable Lennar to prevent the shares of Lennar Class A common stock that MP CA Homes would receive in the business combination from creating an overhang on the market for Lennar Class A common stock.

On October 1, 2017, a telephonic meeting was held with members of CalAtlantic senior management and representatives of J.P. Morgan and Gibson Dunn and members of Lennar senior management and representatives of Citi and Goodwin, to discuss certain key components of a potential transaction. Among the matters discussed on the call was Lennar’s desire to have a cash component to the proposed transaction and potential mechanisms for Lennar to acquire the shares of CalAtlantic common stock owned by MP CA Homes for cash in order to effectuate this cash component. In response to a statement by representatives of CalAtlantic that they did not want diligence to begin until an agreement between Lennar and MP CA Homes was finalized, if such an agreement was a requirement for Lennar to proceed with a transaction, the representatives from Lennar stated that while Lennar would like to enter into an agreement with MP CA Homes under which it would agree to receive cash consideration, this was not a requirement to proceeding with a business combination transaction. The participants also discussed the possibility that Lennar would issue a dividend of its Class B common stock in connection with the transaction. The discussions were reported to MP CA Homes by CalAtlantic.

 

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On October 2, 2017, CalAtlantic and Lennar entered into a customary confidentiality agreement, which contained a customary mutual standstill provision. Also on October 2, 2017, Goodwin distributed an initial draft of the merger agreement to Gibson Dunn.

During the following weeks, representatives of CalAtlantic and Lennar, and representatives of J.P. Morgan, Citi, Gibson Dunn and Goodwin, held a series of calls and meetings in the course of performing due diligence on CalAtlantic and Lennar, respectively.

On October 10, 2017, Gibson Dunn distributed a revised draft of the merger agreement to Goodwin, which included, among other provisions, a “go-shop” provision for the benefit of CalAtlantic with customary terms, an obligation of Lennar to pay a termination fee to CalAtlantic and reimburse CalAtlantic for certain reasonable out-of-pocket fees and expenses incurred by CalAtlantic, in each case upon termination of the merger agreement under certain specified circumstances, and an agreement for an unspecified number of members of the CalAtlantic board to serve on the Lennar board of directors upon closing of the Merger. The revised draft also included significant revisions to the provisions providing the CalAtlantic board with the ability to exercise its fiduciary duties in assessing alternative and superior proposals and changing its recommendation to stockholders with respect to the Merger, including adding a right to do so upon the occurrence of certain intervening events.

On October 11 and 12, 2017, in-person due diligence meetings were held for CalAtlantic and Lennar to perform mutual due diligence, with representatives of CalAtlantic management and Lennar management, and representatives of J.P. Morgan and Citi, attending. During these meetings, Mr. Beckwitt informed Mr. Stowell that senior members of CalAtlantic management should expect their employment to terminate as of the closing date.

On October 13, 2017, Mr. Matlin and another representative of MP CA Homes had an in-person meeting with Messrs. Miller and Beckwitt and a representative of Citi to discuss proposed terms of a voting and election agreement between MP CA Homes and Lennar, including a requirement that MP CA Homes vote in support of the transaction, the terms of its post-closing lockup with regard to the Lennar shares that MP CA Homes would receive as a result of a business combination between Lennar and CalAtlantic , and the terms under which MP CA Homes would be amenable to accepting cash consideration for its shares of CalAtlantic common stock in the potential business combination transaction. Mr. Matlin communicated that MP CA Homes was amenable to accepting cash consideration, on the right terms, but only if the cash component was available on the same terms to all CalAtlantic stockholders. The parties agreed to consider the terms of the voting and election agreement and discuss again the following week.

On October 16, 2017, Goodwin distributed a revised draft of the merger agreement to Gibson Dunn, which, among other matters, did not include a “go-shop” provision or a provision providing for members of the CalAtlantic board to serve on the Lennar board of directors, but which did include an obligation of Lennar to pay a termination fee to CalAtlantic and to reimburse CalAtlantic for certain fees and expenses under some circumstances, in addition to a reciprocal obligation of CalAtlantic to reimburse Lennar for certain fees and expenses.

On October 18, 2017, Mr. Matlin and another representative of MP CA Homes, Mr. Beckwitt and a representative of Citi met in New York to discuss terms under which MP CA Homes would be amenable to accepting cash consideration for its shares of CalAtlantic common stock in connection with a potential business combination transaction. Mr. Matlin communicated that MP CA Homes was amenable to accepting cash consideration for all of its shares of CalAtlantic common stock at a 5% discount to the implied price per share of CalAtlantic common stock calculated the day prior to announcement of the transaction based on a 0.91 exchange ratio. Lennar agreed to consider terms of the cash election component of the merger consideration and to come back to MP CA Homes with a definitive proposal.

On October 20, 2017, Goodwin distributed to Gibson Dunn an initial draft of a voting agreement under which Mr. Miller and affiliated entities would agree to vote all the Lennar stock they owned or had the power to

 

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vote in favor of the proposed business combination with CalAtlantic. At the time, the shares Mr. Miller had the power to vote entitled the holders to cast approximately 41.7% of the total number of votes that could be cast by Lennar stockholders.

On October 21, 2017, Gibson Dunn sent a revised draft of the merger agreement to Goodwin. This revised draft proposed, among other matters, a “go-shop” provision, termination fees payable by CalAtlantic to Lennar equal to 1.25 percent and 2.25 percent of the equity value of CalAtlantic if the merger agreement was terminated under certain circumstances during the go-shop period and thereafter, respectively, and a termination fee payable by Lennar to CalAtlantic equal to 4.0 percent of the equity value of CalAtlantic.

On October 22, 2017, Goodwin provided Gibson Dunn with Lennar’s list of open items on the merger agreement. This included a proposal for one member of the CalAtlantic board to join the Lennar board of directors upon consummation of the transaction, elimination of the go shop right, three matching rights in the event of a superior proposal, an obligation of the CalAtlantic board to provide an irrevocable termination notice before Lennar would negotiate amending the terms of the merger agreement in the event of a superior proposal and a termination fee of 4.0 percent for each party.

On October 23, 2017, Mr. Stowell held a telephonic discussion with Mr. Beckwitt to discuss the status of negotiations, unresolved issues in the draft merger agreement and potential terms for the cash consideration in the transaction. During this discussion, Mr. Beckwitt indicated that due to recent changes in the price per share of Lennar Class A common stock relative to the price per share of CalAtlantic common stock, Lennar could no longer agree to a transaction at an exchange ratio of 0.91 shares of Lennar Class A common stock for each share of CalAtlantic stock, and that Lennar was instead prepared to agree to an exchange ratio of 0.87. Mr. Beckwitt stated that Lennar had satisfactorily completed its due diligence on CalAtlantic, and the decrease in proposed price was not a result of any diligence findings. Mr. Stowell stated that he would take any revised proposal to the CalAtlantic board, but that he expected an exchange ratio of 0.87 would not be well received by the CalAtlantic board, particularly if due diligence supported Lennar’s prior assumptions on the contributions of CalAtlantic’s business to the combined company. The closing price per share of CalAtlantic common stock and the Lennar Class A common stock on October 20, 2017, the last full trading day prior to Lennar’s revised proposal, was $38.91 and $57.50, respectively. As of such date, an exchange ratio of 0.87 represented an implied price per share of CalAtlantic common stock of approximately $50.02 and a premium of approximately 28.6% to the price per share of CalAtlantic common stock.

Also on October 23, 2017, representatives of Gibson Dunn had a telephonic meeting with representatives of Goodwin to discuss the draft merger agreement.

Also on October 23, 2017, there was a conversation among Mr. Matlin, Mr. Beckwitt and a representative of Citi regarding the voting and cash election agreement.

On October 24, 2017, Goodwin sent a revised draft of the merger agreement to Gibson Dunn, which included, among other provisions, a cash election mechanism permitting stockholders of CalAtlantic to elect, prior to the stockholder meetings, to receive cash consideration in the Merger in lieu of shares of Lennar common stock, subject to a cap and proration as set forth in the draft merger agreement, the appointment of a member of the CalAtlantic board to the Lennar board of directors upon consummation of the Merger, to be selected by the Lennar board of directors, and termination fees payable by each of CalAtlantic and Lennar to the other equal to 4.0 percent of CalAtlantic equity value, without a “go-shop” provision.

On October 24, 2017 and October 25, 2017, there were a number of conversations between Mr. Beckwitt and Mr. Stowell regarding various provisions of the proposed merger agreement, including provisions relating to deal protections, acceleration of equity awards to CalAtlantic employees whose employment is terminated by Lennar, and cash election features of the proposed merger consideration.

 

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During the period from September 27, 2017 through October 24, 2017, members of the CalAtlantic compensation committee discussed the proposed retention agreements, including the advisability of retention agreements, which members of management would receive retention agreements, the amount of the change in control payment expected to be received by each such officer under such officer’s then current change in control arrangements, and the proposed amount of retention bonuses for each of Messrs. Stowell, McCall and Babel and Ms. Marlett, to eliminate any perceived pay inequity.

On October 25, 2017 there was a meeting in New York among Mr. Matlin and another representative of MP CA Homes and Mr. Beckwitt and a representative of Citi regarding the price Lennar would pay for shares it purchased from MP CA Homes.

On October 25, 2017, Mr. Stowell and Mr. Beckwitt had several conversations regarding the exchange ratio. Mr. Stowell told Mr. Beckwitt that the CalAtlantic board of directors would not move forward on the basis of a 0.87 exchange ratio, but that he believed that the CalAtlantic board would support a 0.90 exchange ratio. After extensive conversations, Mr. Stowell and Mr. Beckwitt tentatively agreed to present to their respective boards of directors an exchange ratio of 0.885 shares of Lennar Class A common stock for each share of CalAtlantic common stock.

On October 25, 2017, the compensation committee of the CalAtlantic board met to consider and approve certain matters, including retention letter agreements to be entered into by certain members of CalAtlantic senior management and CalAtlantic, and payments to the members of the Advisory Committee for their service on the Advisory Committee. See the section entitled “The Merger—Interests of CalAtlantic Directors and Executive Officers in the Merger” beginning on page 68 for a description of the retention letter agreements.

Also on October 25, 2017, the CalAtlantic board held a regularly scheduled telephonic meeting, with members of CalAtlantic senior management, and representatives of J.P. Morgan and Gibson Dunn, attending. During this meeting, Mr. Stowell provided an update on the status of negotiations with Lennar regarding a potential business combination transaction, including Lennar’s recently revised proposal for a transaction at an exchange ratio of 0.885. Mr. Matlin also provided an update on discussions between Lennar and MP CA Homes with respect to proposed arrangements in which MP CA Homes would agree to backstop a cash election for CalAtlantic stockholders in a transaction. Representatives of J.P. Morgan provided a preliminary analysis of Lennar’s revised proposal, including as compared to Lennar’s prior proposal for a transaction at an exchange ratio of 0.91. Representatives of J.P. Morgan also noted certain updates to their preliminary financial analysis including an increase in estimated synergies as provided by CalAtlantic management based on further due diligence, Lennar’s proposed cash election to be supported by MP CA homes, as well as changes in market prices for the stock of both CalAtlantic and Lennar. Representatives of J.P. Morgan further noted that their preliminary valuation analysis of Lennar on a standalone and combined basis now incorporated prospective financial estimates provided by Lennar to CalAtlantic which were reviewed and adjusted by CalAtlantic management and provided to J.P. Morgan. Also during this meeting, representatives of Gibson Dunn provided an overview of key terms of, and unresolved issues in, the draft merger agreement, including regarding the “go-shop” provision, the magnitude of termination fees and the circumstances under which these fees would paid and the ability of the CalAtlantic board to designate a director to serve on the Lennar board of directors upon closing of the Merger. Representatives of Gibson Dunn also provided an overview of the proposed terms of the contemplated voting agreements to be entered into by Mr. Miller and affiliated entities, and MP CA Homes, respectively. The CalAtlantic board determined that Mr. Stowell should serve on the Lennar board of directors upon consummation of the Merger, in part because he would be able to provide continuity and an understanding of the CalAtlantic business that would support a successful integration. The CalAtlantic board further determined, with the assistance of representatives of J.P. Morgan and Gibson Dunn, certain parameters for the magnitude of termination fees that would be acceptable, provided that CalAtlantic’s financial and legal advisors negotiate to ensure the definitive merger agreement contained provisions relating to termination which were more customary than those being proposed by Lennar at that time. The CalAtlantic board discussed proposing a termination fee of 2.25% for both parties. After extensive discussion, the CalAtlantic board determined that it was in the best

 

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interests of the stockholders of CalAtlantic to continue working with Lennar to reach a mutually agreed business combination transaction at an exchange ratio of 0.885, with a cash election component, provided that certain other terms of the transaction be resolved favorably to CalAtlantic and that definitive documentation be executed in the coming days. The CalAtlantic board also discussed with representatives of J.P. Morgan and Gibson Dunn the advisability and mechanics of a partial downside protection mechanism based on Lennar’s stock price. After the J.P. Morgan representatives left the meeting, the CalAtlantic board received and considered, among other matters, a report from the compensation committee of the CalAtlantic board regarding the matters approved by the compensation committee at its October 25, 2017 meeting described above.

On October 26, 2017, Mr. Stowell had a telephonic discussion with Mr. Beckwitt, to communicate the position of the CalAtlantic board and to discuss certain open items with respect to a potential business combination transaction. Mr. Stowell told Mr. Beckwitt that the CalAtlantic board would agree to a 0.885 exchange ratio, but wanted to include a ratcheting of the exchange ratio from 0.885 to 0.91 if the price of Lennar Class A common stock declined below $57.94 down to $56.35, where the 0.91 exchange ratio would be locked. Mr. Beckwitt noted, among other matters, that Lennar would not agree to a “go-shop” provision in the merger agreement or a termination fee of 2.25%.

Also on October 26, 2017, Gibson Dunn sent a revised draft of the merger agreement to Goodwin, which included, among other provisions, a termination fee payable by CalAtlantic to Lennar equal to 1.5% of the equity value of CalAtlantic if the merger agreement were terminated within thirty days of the signing date, and equal to 4.0% of the equity value of CalAtlantic if the merger agreement were terminated thereafter. The revised draft did not include a “go-shop” provision.

Also on October 26, 2017, Goodwin sent a draft of a voting and cash election agreement, to be entered into by Lennar and MP CA Homes, to MP CA Home’s legal advisor Ropes & Gray LLP, which we refer to as “Ropes.”

On October 27, 2017, Mr. Beckwitt told Mr. Stowell Lennar would not agree to the downside protection of the 0.885 exchange ratio, and they tentatively settled on a 0.885 exchange ratio, subject to the approval of their respective boards of directors. They also tentatively agreed that the termination fee would be 3% of the equity value of the Merger on the day the agreement was signed. Mr. Stowell told Mr. Beckwitt that he understood that MP CA Homes would not agree to a discount of more than 5% to the price per share of CalAtlantic stock implied by the 0.885 exchange ratio immediately before the transaction is announced and that it did not want the cash option to apply to all its shares.

On October 28, 2017, representatives of Gibson Dunn had a telephonic meeting with representatives of Goodwin to discuss the draft merger agreement. During October 28 and 29, 2019, Gibson Dunn and Goodwin exchanged revised drafts of, and had several discussions regarding, the merger agreement.

Also on October 28, 2017, Mr. Matlin and Mr. Beckwitt had a telephonic meeting to discuss the terms on which MP CA Homes would make a cash election. Following that call, Mr. Beckwitt told Mr. Stowell that unless MP CA Homes would agree to backstop a cash election option at a discount of 6%, Lennar would not agree to a transaction. On October 29, 2017, there were a number of conversations among some or all of Mr. Beckwitt, Mr. Matlin and Mr. Stowell, which resulted in agreement that the termination fee would be 2.95% of the equity value of the transaction, the cash election option would be at $48.26 per share, which was 6% below the value of 0.885 shares of Lennar Class A based upon its most recent trading price, and that provided that the terms of the merger agreement were acceptable to the CalAtlantic board, MP CA Homes would backstop that cash for up to 85 percent of the shares of CalAtlantic held by MP CA Homes.

On the morning of October 29, 2017, the CalAtlantic board held a telephonic meeting, with members of CalAtlantic senior management, and representatives of J.P. Morgan and Gibson Dunn, attending. Mr. Stowell provided an update on negotiations with Lennar, noting that while the proposed exchange ratio remained 0.885,

 

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certain other key terms of the merger agreement were resolved in favor of CalAtlantic. Representatives of Gibson Dunn noted for the CalAtlantic board its fiduciary duties. Representatives of Gibson Dunn also provided an overview of key terms of the draft merger agreement, a draft of which had been provided to the CalAtlantic board, including the terms relating to the ability of the CalAtlantic board to exercise its fiduciary duties in assessing alternative and superior proposals and changing its recommendation to stockholders with respect to the Merger, and the proposed termination fee equal to 2.95 percent of CalAtlantic equity value payable by each of CalAtlantic and Lennar to the other if the merger agreement were terminated under certain specified circumstances. Representatives of Gibson Dunn also noted how such key terms had changed since being previously presented to the CalAtlantic board. Mr. Matlin summarized the terms upon which MP CA Homes had agreed to backstop the cash election in the proposed transaction. The CalAtlantic board determined to reconvene at a later time that day to further review the proposed transaction.

During the afternoon of October 29, 2017, Ropes and Goodwin exchanged drafts of the MP CA Homes’ voting and cash election agreement and negotiated the final terms of such agreement.

Later on October 29, 2017, the CalAtlantic board reconvened and held a telephonic meeting, with members of CalAtlantic senior management, and representatives of J.P. Morgan and Gibson Dunn, attending. Representatives of J.P. Morgan summarized the interactions with Lennar to date. Representatives of J.P. Morgan also presented their financial analysis of the proposed transaction at an exchange ratio of 0.885 shares of Lennar common stock for each share of CalAtlantic common stock, subject to a cash election mechanism such that approximately 20 percent of the aggregate consideration could be in cash. J.P. Morgan then delivered to the CalAtlantic board its oral opinion, which was confirmed by delivery of a written opinion dated October 29, 2017, to the effect that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken by J.P. Morgan in preparing the opinion, the consideration to be paid to the holders of CalAtlantic common stock in the Merger, was fair, from a financial point of view, to such stockholders, as more fully described below in the section “The Merger—Opinion of CalAtlantic’s Financial Advisor” beginning on page 57 of this joint proxy statement/prospectus. The full text of the written opinion of J.P. Morgan, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with such opinion, is attached as Annex C hereto. Following discussion of the presentation by representatives of J.P. Morgan, J.P. Morgan’s delivery of its oral opinion and review of proposed resolutions by Mr. Babel, and after deliberation and inquiry by the CalAtlantic board, the CalAtlantic board unanimously determined, among other matters, that the Merger and the other transactions contemplated by the merger agreement were advisable, fair to and in the best interests of, CalAtlantic’s stockholders, and the CalAtlantic board adopted and approved the merger agreement, the Merger and the other transactions contemplated by the merger agreement and recommended that the stockholders of CalAtlantic adopt the merger agreement and approve the Merger.

Later on October 29, 2017, CalAtlantic and Lennar executed the definitive merger agreement. Mr. Miller and certain affiliated entities executed a voting agreement with CalAtlantic. MP CA Homes executed a voting and cash election agreement with Lennar.

The transaction was announced pursuant to a joint press release issued by Lennar and CalAtlantic prior to market open on October 30, 2017.

The merger agreement provides that CalAtlantic and its representatives may interact with third parties that have submitted an alternative acquisition proposal to clarify the terms and conditions of such proposal, and that CalAtlantic may furnish non-public information to third parties that have submitted an alternative acquisition proposal that the CalAtlantic board determines in good faith constitutes, or is reasonably expected to result in, a transaction that would be more favorable to CalAtlantic stockholders than the Merger, as described further under “The Merger Agreement – Termination of the merger agreement.” As of the date of this joint proxy statement/prospectus, no person has made an alternative acquisition proposal to acquire CalAtlantic.

 

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Lennar Board Recommendation and Its Reasons for Approving the Merger

The Lennar board of directors has unanimously recommended that Lennar’s stockholders vote in favor of the Lennar Merger Proposal, the Lennar Authorized Share Proposal and, if necessary, the Lennar Adjournment Proposal. In evaluating the Merger, the Lennar board of directors received presentations from Lennar’s senior management and consulted with Lennar’s outside counsel, Goodwin Procter, LLP, and Lennar’s financial adviser, Citigroup Global Markets. It considered a number of expected benefits of the Merger to Lennar and some negative aspects of the Merger. The factors that Lennar’s board of directors considered included the following:

Expected Benefits of the Merger

 

    The merged companies would create a better platform for enhanced shareholder value.

 

    The Merger is expected to be accretive to Lennar’s earnings per share by approximately $0.04 per share in fiscal year 2018, without taking account of transaction costs, and to be accretive by approximately $0.68 per share to the earnings per share Lennar anticipated generating in fiscal 2019 under a base plan that would have included effects of share repurchases.

 

    The Merger will give Lennar significant concentrated local market share, with a top three market share position in 26 of the 30 fastest growing metropolitan statistical areas, which will enable Lennar to have greater access to land and labor, leading to greater efficiencies and opportunities.

 

    The Merger will increase the areas where Lennar can become the builder of choice for subcontractors and suppliers, with resulting reductions in cycle times, increases in inventory turns, and better access to skilled labor.

 

    Acquiring homebuilding operations in markets where we have local market and product knowledge will assist with a smooth integration.

 

    The Merger is expected to result in approximately $100 million of cost savings in fiscal year 2018 and $365 million per year of cost savings in fiscal year 2019 and subsequent years, as a result of reduced general and administrative costs and reduced homebuilding costs. The ability to achieve these cost savings will result in part from the fact that Lennar and CalAtlantic have compatible product strategies.

 

    Acquiring existing communities with known absorption rates provides a foundation for growth in land constrained markets.

 

    The Merger will expand synergies with non-homebuilding aspects of Lennar’s activities, such as residential mortgages and other financial services and technology related partnerships and initiatives.

 

    Although the Merger will require Lennar to incur or assume a substantial amount of additional debt, cash flow expected to be generated by the combined company is anticipated to enable Lennar by the end of fiscal year 2019 to reduce its indebtedness to the point where the ratio of its debt to total capital and the ratio of its net debt to total capital will be 36.0% and 33.3%, respectively, compared with 40.0% and 37.3%, respectively, which were expected to be the ratios at November 30, 2017 (which was before giving effect to the Merger or indebtedness incurred in anticipation of the Merger).

 

    Cash flow expected to be generated by the combined company will, in addition to enabling Lennar substantially to reduce its debt, enable Lennar to engage in a stock repurchase program, with a resulting increase in earnings per share.

 

    Lennar’s management demonstrated following the February 2017 acquisition of WCI Communities, Inc., and has demonstrated after other acquisitions, that applying Lennar’s homebuilding techniques to properties accumulated by other homebuilders can accomplish cost savings and increase gross margins. The combined company is expected to have the type of above average gross margins that have been consistently achieved by Lennar for a number of years.

 

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    Acquiring an existing homebuilding company gives Lennar access to already entitled land that can be developed without the delay involved in obtaining entitlements.

Negative Aspects of the Merger

 

    Partially because of transaction costs and integration costs, the Merger is expected to have only a small accretive effect on Lennar’s fiscal year 2018 earnings per share.

 

    Lennar will have to incur substantial indebtedness in connection with the Merger and to redeem or repay certain CalAtlantic debt shortly after the Merger. Because of this, the Merger will significantly increase Lennar’s ratios of debt to total capital and net debt to total capital for fiscal year 2018.

 

    Because of the substantial amount of Lennar stock that will be issued in connection with the Merger, the return on Lennar’s equity and the return on its capital will be lower during fiscal year 2018 and fiscal year 2019 than if Lennar did not do the Merger.

 

    The Merger will result in a substantial amount of goodwill being recorded on Lennar’s balance sheet (the exact amount will depend on the market price of Lennar’s stock and the fair value of CalAtlantic’s assets when the Merger is consummated).

 

    Much of the expected benefit of the Merger depends on the ability of Lennar’s management to apply Lennar cost saving techniques to the CalAtlantic operations.

Each director gave the various positive and negative considerations described above the relative weightings he or she believed appropriate. Therefore, no particular considerations were given general priority over any other considerations.

Based upon the directors’ individual views of the Merger and related matters, the Lennar board of directors unanimously voted to recommend that Lennar stockholders vote “FOR” the Lennar Merger Proposal, “FOR” the Lennar Authorized Share Proposal and “FOR” the Lennar Adjournment Proposal, if necessary, including to solicit additional proxies if there are not sufficient votes to adopt the proposals at the time of the Lennar special meeting.

CalAtlantic Board Recommendation and Its Reasons for the Merger

At its meeting on October 29, 2017, the CalAtlantic board of directors unanimously approved the merger agreement and the transactions contemplated thereby, including the Merger. The CalAtlantic board of directors unanimously recommends that CalAtlantic stockholders vote “FOR” each of the proposals being submitted to a vote of the CalAtlantic stockholders at the CalAtlantic special meeting.

The CalAtlantic board of directors considered many reasons in making its decision to recommend the adoption of the merger agreement and approval of the transactions contemplated thereby. In arriving at its decision, the CalAtlantic board of directors consulted with CalAtlantic’s senior management, and legal and financial advisors, reviewed a significant amount of information, considered a number of factors and concluded in its business judgment that the proposed Merger is likely to result in significant strategic and financial benefits to CalAtlantic and its stockholders.

Strategic and Financial Benefits of Merger

In evaluating the Merger, the CalAtlantic board of directors considered a number of positive factors, including the following (not in any relative order of importance):

 

    a combination of CalAtlantic with Lennar would provide the long-term strategic benefit of creating a more diversified company, with increased scope and scale of homebuilding activities, that would become the largest homebuilder in the United States by revenues;

 

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    that CalAtlantic stockholders would own approximately 25% of Lennar following completion of the Merger, and that the transaction consideration, comprised of Lennar common stock, with the ability to elect cash up to the maximum cash amount, provides immediate value to the CalAtlantic stockholders and also provides the CalAtlantic stockholders with the opportunity to participate in the appreciation in value that the CalAtlantic board of directors believes will be created as a result of the Merger;

 

    the potential opportunities for greater operational efficiencies and synergies through conducting CalAtlantic’s and Lennar’s respective operations as part of a single enterprise and the expectation that the CalAtlantic stockholders would benefit from such efficiencies and synergies, including as a result of enhanced national and local market purchasing power as a result of increased scale;

 

    the belief of the CalAtlantic board of directors that the consideration to be received by the CalAtlantic stockholders in the Merger was an attractive offer in light of the recent and historical per share price performance of CalAtlantic common stock as compared to that of other companies in the United States homebuilding industry including Lennar;

 

    the expectation that combining the operations of CalAtlantic with Lennar would promote increased earnings per share (in comparison to CalAtlantic on a stand-alone basis) through realization of synergies, cost savings and continuation of Lennar’s track-record of positive performance; see the section entitled “Unaudited Prospective Financial Information—CalAtlantic Management’s Unaudited Prospective Standalone Financial Information and the Synergies” beginning on page 63 for a description of such synergies and cost savings considered by the CalAtlantic board;

 

    the belief of the CalAtlantic board of directors that the strategic alternatives available to CalAtlantic, including the alternative of remaining a standalone company, were less favorable to the CalAtlantic stockholders than the Merger given Lennar’s historical performance in the U.S. homebuilding industry, and the potential risks, likely value creation, uncertainties and timing associated with these alternatives;

 

    the prospects for Lennar following completion of the Merger given the CalAtlantic board of directors’ knowledge of each of CalAtlantic’s and Lennar’s business, operations, financial condition, and earnings, taking into account Lennar’s publicly filed information and the results of CalAtlantic’s due diligence review of Lennar;

 

    the fact that Mr. Stowell, the current executive chairman of the CalAtlantic board of directors, would be expected to serve on the Lennar board of directors upon completion of the Merger; and

 

    the fact that the exchange ratio is fixed and will not fluctuate based upon changes in the market price of CalAtlantic common stock or Lennar common stock between the date of the merger agreement and the date of the completion of the Merger.

Uncertainties, Risks and Potentially Negative Factors

In the course of its deliberations, the CalAtlantic board of directors also considered a variety of uncertainties, risks and other potentially negative factors relevant to the transaction, including the following (not in any relative order of importance):

 

    the potential negative effects on CalAtlantic’s business related to the announcement and pendency of the Merger, including the impact on CalAtlantic’s employees and the potential for increased employee attrition and increased difficulty with employee recruitment;

 

    the restrictions on the conduct of CalAtlantic’s business during the period between the execution of the merger agreement and the completion of the Merger;

 

    the costs associated with the completion of the Merger and the realization of the benefits expected to be obtained in connection with the Merger, including management’s time and energy and potential opportunity cost;

 

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    the challenges in absorbing the effect of any failure to complete the Merger, including potential termination fees, impact on CalAtlantic’s business and stockholder and market reactions;

 

    the challenges inherent in the integration of two businesses of the size and complexity of CalAtlantic and Lennar;

 

    the risk of not being able to realize all of the anticipated cost savings and operational synergies as a result of the Merger and the risk that other anticipated benefits might not be realized;

 

    the difficulties of combining the businesses and workforces of CalAtlantic and Lennar based on, among other things, differences in the cultures of the two companies;

 

    the right of the Lennar board of directors to withdraw or modify in a manner adverse to CalAtlantic its recommendation to the Lennar stockholders regarding the Merger, subject to Lennar paying CalAtlantic a termination fee of $178.7 million in the event that CalAtlantic elects to terminate the merger agreement as a result;

 

    the limited circumstances under which Lennar is required to pay CalAtlantic a termination fee of $178.7 million if the merger agreement is terminated;

 

    the risk that CalAtlantic stockholders or Lennar stockholders may object to and challenge the Merger and take actions that may prevent or delay the consummation of the Merger, including to vote down the proposals at the CalAtlantic or Lennar special meetings;

 

    the possibility, given trends in public merger transactions, of potential stockholder litigation, and the attendant costs, delays and diversion of attention of management;

 

    the fact that the merger agreement contains certain provisions that may have the effect of discouraging proposals for alternative acquisition transactions involving CalAtlantic, including: (i) the restriction on CalAtlantic’s ability to solicit proposals for alternative transactions, (ii) the limitations on the CalAtlantic board of directors’ ability to change its recommendation to CalAtlantic stockholders regarding the Merger, (iii) the requirement that CalAtlantic notify Lennar of alternative acquisition proposals, and (iv) the requirement that CalAtlantic pay a termination fee of $178.7 million to Lennar in certain circumstances following termination of the merger agreement;

 

    the risk that CalAtlantic could be required to reimburse up to $30.0 million of Lennar’s reasonable, out-of-pocket transaction related fees and expenses in the event that CalAtlantic stockholders do not adopt the merger agreement and approve the Merger;

 

    the potential that the fixed exchange ratio under the merger agreement could result in Lennar delivering less value to the CalAtlantic stockholders than had been anticipated by the CalAtlantic board of directors should the value of the shares of Lennar common stock decrease from the date of the execution of the merger agreement; and

 

    risks of the type and nature described under “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” beginning on pages 26 and 36, respectively.

Further, the CalAtlantic board of directors considered that some members of the CalAtlantic board of directors and certain CalAtlantic executive officers have interests in the proposed Merger as individuals that are in addition to, and that may be different from, the interest of the CalAtlantic stockholders generally, as described under “The Merger—Interests of CalAtlantic Directors and Executive Officers in the Merger” beginning on page 68.

For the reasons set forth above and other reasons considered, the CalAtlantic board of directors unanimously determined that the Merger and the transactions contemplated by the merger agreement are fair to, advisable and in the best interests of CalAtlantic and its stockholders, and unanimously adopted and approved, and declared advisable, the merger agreement. The CalAtlantic board of directors unanimously recommends that the CalAtlantic stockholders vote “FOR” each of the proposals being submitted to a vote of the CalAtlantic stockholders at the CalAtlantic special meeting.

 

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The foregoing discussion of the information and reasons considered by the CalAtlantic board of directors is not exhaustive but is intended to reflect the material reasons considered by the CalAtlantic board of directors in its consideration of the Merger. In view of the complexity, and the large number, of the reasons considered, the CalAtlantic board of directors, both individually and collectively, did not find it practicable to and did not attempt to quantify or assign any relative or specific weight to the various reasons. Rather, the CalAtlantic board of directors based its recommendation on the totality of the information presented to and considered by it. In addition, individual members of the CalAtlantic board of directors may have given different weight to different reasons.

The foregoing discussion of the information and reasons considered by the CalAtlantic board of directors is forward-looking in nature. This information should be read in light of the reasons described under “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 36.

Based upon the directors’ individual views of the Merger and related matters, the CalAtlantic board of directors unanimously voted to recommend that CalAtlantic stockholders vote “FOR” the CalAtlantic Merger Proposal, “FOR” the CalAtlantic Merger-Related Compensation Proposal, and “FOR” the CalAtlantic Adjournment Proposal, if necessary, including adjournments to solicit additional proxies if there are not sufficient votes to adopt the merger agreement at the time of the CalAtlantic special meeting.

Opinion of CalAtlantic’s Financial Advisor

Pursuant to an engagement letter dated September 15, 2017, CalAtlantic retained J.P. Morgan as its financial advisor in connection with the proposed Merger.

At the meeting of the CalAtlantic board on October 29, 2017, J.P. Morgan rendered its oral opinion to the CalAtlantic board that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken by J.P. Morgan in preparing the opinion, the consideration to be paid to the holders of CalAtlantic common stock in the proposed Merger was fair, from a financial point of view, to such stockholders. J.P. Morgan has confirmed its October 29, 2017 oral opinion by delivering its written opinion to the CalAtlantic board, dated October 29, 2017, that, as of such date, the consideration to be paid to the holders of CalAtlantic common stock in the proposed Merger was fair, from a financial point of view, to such stockholders.

The full text of the written opinion of J.P. Morgan dated October 29, 2017, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken by J.P. Morgan in preparing the opinion, is attached as Annex C to this joint proxy statement/prospectus and is incorporated by reference into this joint proxy statement/prospectus. The summary of the opinion of J.P. Morgan set forth in this joint proxy statement/prospectus is qualified in its entirety by reference to the full text of such opinion. CalAtlantic stockholders are urged to read the opinion in its entirety. J.P. Morgan’s written opinion was addressed to the CalAtlantic board (in its capacity as such) in connection with and for the purposes of its evaluation of the proposed Merger, was directed only to the consideration to be paid in the proposed Merger and did not address any other aspect of the proposed Merger. J.P. Morgan expressed no opinion as to the fairness of the consideration to the holders of any other class of securities, creditors or other constituencies of CalAtlantic or as to the underlying decision by CalAtlantic to engage in the proposed Merger. The issuance of J.P. Morgan’s opinion was approved by a fairness committee of J.P. Morgan. The opinion does not constitute a recommendation to any stockholder of CalAtlantic as to how such stockholder should vote with respect to the proposed Merger or any other matter.

In arriving at its opinions, J.P. Morgan, among other things:

 

    reviewed the merger agreement;

 

    reviewed certain publicly available business and financial information concerning CalAtlantic and Lennar and the industries in which they operate;

 

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    compared the financial and operating performance of CalAtlantic and Lennar with publicly available information concerning certain other companies J.P. Morgan deemed relevant and reviewed the current and historical market prices of CalAtlantic common stock and Lennar Class A common stock and certain publicly traded securities of such other companies;

 

    reviewed certain internal financial analyses and forecasts prepared by the management of CalAtlantic and certain internal financial estimates prepared by the management of Lennar relating to their respective businesses as described in the section titled, “Unaudited Prospective Financial Information” in this joint proxy statement/prospectus, as well as adjustments and extrapolations made by the management of CalAtlantic to such projections or estimates of both businesses;

 

    reviewed estimates of amounts and timing of the cost savings and related expenses and synergies expected to result from the proposed Merger, which we refer to as the “Synergies,” as provided by the management of CalAtlantic based on their discussions with the management of Lennar; and

 

    performed such other financial studies and analyses and considered such other information as J.P. Morgan deemed appropriate for the purposes of its opinion.

In addition, J.P. Morgan held discussions with certain members of the management of CalAtlantic and Lennar with respect to certain aspects of the proposed Merger, and the past and current business operations of CalAtlantic and Lennar, the financial condition and future prospects and operations of CalAtlantic and Lennar, the effects of the Merger on the financial condition and future prospects of CalAtlantic and Lennar, and certain other matters J.P. Morgan believed necessary or appropriate to its inquiry.

In giving its opinion, J.P. Morgan relied upon and assumed the accuracy and completeness of all information that was publicly available or was furnished to or discussed with J.P. Morgan by CalAtlantic and Lennar or otherwise reviewed by or for J.P. Morgan. J.P. Morgan did not independently verify any such information or its accuracy or completeness and, pursuant to its engagement letter with CalAtlantic, J.P. Morgan did not assume any obligation to undertake any such independent verification. J.P. Morgan did not conduct and was not provided with any valuation or appraisal of any assets or liabilities, nor did J.P. Morgan evaluate the solvency of CalAtlantic or Lennar under any state or federal laws relating to bankruptcy, insolvency or similar matters. In relying on financial analyses and forecasts provided to J.P. Morgan or derived therefrom, including the synergies, J.P. Morgan assumed that they were reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by management as to the expected future results of operations and financial condition of CalAtlantic and Lennar to which such analyses or forecasts relate. J.P. Morgan expressed no view as to such analyses or forecasts (including the synergies) or the assumptions on which they were based. J.P. Morgan also assumed that the proposed Merger and the other transactions contemplated by the merger agreement will qualify as a tax-free reorganization for United States federal income tax purposes, and will be consummated as described in the merger agreement. J.P. Morgan also assumed that the representations and warranties made by CalAtlantic and Lennar in the merger agreement and the related agreements were and will be true and correct in all respects material to its analysis. J.P. Morgan is not a legal, regulatory or tax expert and relied on the assessments made by advisors to CalAtlantic with respect to such issues. J.P. Morgan further assumed that all material governmental, regulatory or other consents and approvals necessary for the consummation of the proposed Merger will be obtained without any adverse effect on CalAtlantic or Lennar or on the contemplated benefits of the proposed Merger.

The projections furnished to J.P. Morgan for CalAtlantic were prepared by CalAtlantic management, and the estimates for Lennar were prepared by Lennar management and provided to CalAtlantic management, which subsequently reviewed, adjusted and approved such estimates prior to providing them to J.P. Morgan. Neither CalAtlantic nor Lennar publicly discloses internal management projections or estimates of the type provided to J.P. Morgan in connection with J.P. Morgan’s analysis of the proposed Merger, and such projections or estimates were not prepared with a view toward public disclosure. These projections and estimates were based on numerous variables and assumptions that are inherently uncertain and may be beyond the control of management,

 

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including, without limitation, factors related to general economic and competitive conditions and prevailing interest rates. Accordingly, actual results could vary significantly from those set forth in such projections or estimates. For more information regarding the use of such projections or estimates, please refer to the section entitled “Unaudited Prospective Financial Information” beginning on page 63 of this joint proxy statement/prospectus.

J.P. Morgan’s opinion was necessarily based on economic, market and other conditions as in effect on, and the information made available to J.P. Morgan as of, the date of such opinion. J.P. Morgan’s opinion noted that subsequent developments may affect J.P. Morgan’s opinion, and that J.P. Morgan does not have any obligation to update, revise, or reaffirm such opinion. J.P. Morgan’s opinion is limited to the fairness, from a financial point of view, of the consideration to be paid to the holders of CalAtlantic common stock in the proposed Merger, and J.P. Morgan has expressed no opinion as to the fairness of any consideration to the holders of any other class of securities, creditors or other constituencies of CalAtlantic or the underlying decision by CalAtlantic to engage in the proposed Merger. Furthermore, J.P. Morgan expressed no opinion with respect to the amount or nature of any compensation to any officers, directors, or employees of any party to the proposed Merger, or any class of such persons relative to the consideration to be paid to the holders of CalAtlantic common stock in the proposed Merger or with respect to the fairness of any such compensation . J.P. Morgan expressed no opinion as to the price at which CalAtlantic common stock or Lennar Class A common stock will trade at any future time.

The terms of the merger agreement were determined through arm’s length negotiations between CalAtlantic and Lennar, and the decision to enter into the merger agreement was solely that of the CalAtlantic board. J.P. Morgan’s opinion and financial analyses were only one of the many factors considered by the CalAtlantic board in its evaluation of the proposed Merger and should not be viewed as determinative of the views of the CalAtlantic board or CalAtlantic management with respect to the proposed Merger or the consideration to be paid to the holders of CalAtlantic common stock in the proposed Merger.

In accordance with customary investment banking practice, J.P. Morgan employed generally accepted valuation methodology in rendering its opinion to the CalAtlantic board on October 29, 2017 and in the presentation delivered to the CalAtlantic board on such date in connection with the rendering of such opinion. The following is a summary of the material financial analyses utilized by J.P. Morgan in connection with rendering its opinion to the CalAtlantic board and does not purport to be a complete description of the analyses or data presented by J.P. Morgan. Some of the summaries of the financial analyses include information presented in tabular format. The tables are not intended to stand alone, and in order to more fully understand the financial analyses used by J.P. Morgan, the tables must be read together with the full text of each summary. Considering the data set forth below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of J.P. Morgan’s analyses.

Public Trading Multiples Analysis . Using publicly available information, J.P. Morgan compared selected financial data of CalAtlantic and Lennar with similar data for selected publicly traded companies engaged in businesses which J.P. Morgan judged to be sufficiently analogous to the business of CalAtlantic and Lennar or aspects thereof.

For CalAtlantic, the companies selected by J.P. Morgan were as follows:

 

    D.R. Horton, Inc.

 

    Lennar Corporation

 

    PulteGroup, Inc.

 

    Toll Brothers, Inc.

 

    Taylor Morrison Home Corporation

 

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    TRI Pointe Group, Inc.

 

    Meritage Homes Corporation

For Lennar, the companies selected by J.P. Morgan were as follows:

 

    D.R. Horton, Inc.

 

    PulteGroup, Inc.

 

    Toll Brothers, Inc.

None of the selected companies reviewed is identical to CalAtlantic or Lennar. These companies were selected, among other reasons, because they are publicly traded companies with operations and businesses that, for purposes of J.P. Morgan’s analysis, may be considered similar to those of CalAtlantic and Lennar. However, certain of these companies may have characteristics that are materially different from those of CalAtlantic and Lennar. The analyses necessarily involve complex considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the selected companies differently than they would affect CalAtlantic or Lennar.

Using publicly available information, J.P. Morgan calculated, for each selected company, the ratio of the company’s stock price to the respective company’s latest available tangible book value (including book value of in-the-money convertible debt securities) divided by the number of diluted shares, which we refer to as the “Price/Tangible Book Value,” and the ratio of the company’s stock price to the mean consensus equity research analyst estimate for earnings per share for 2018, which we refer to as the “Price/2018E EPS”.

Based on the results of this analysis, J.P. Morgan selected multiple reference ranges for Price/Tangible Book Value of 1.3x – 1.8x for CalAtlantic and 1.6x – 2.3x for Lennar and multiple reference ranges for Price/2018E EPS of 9.5x – 12.5x for CalAtlantic and 11.0x – 14.0x for Lennar.

After applying such ranges to the respective tangible book value per share provided by management, the mean consensus research analyst estimate for earnings per share for 2018 and the estimated management earnings per share for 2018, in each case, with respect to CalAtlantic and Lennar, the analysis indicated the following implied per share equity value ranges for CalAtlantic common stock and Lennar Class A common stock, rounded to the nearest $0.25:

 

     Implied Per Share
Equity Value
 
     Low      High  

CalAtlantic

     

Price/Tangible Book Value

   $ 39.00      $ 53.75  

Price/2018E EPS (Consensus)

   $ 38.25      $ 50.50  

Price/2018E EPS (CalAtlantic Management)

   $ 46.25      $ 60.75  

Lennar

     

Price/Tangible Book Value

   $ 50.50      $ 72.50  

Price/2018E EPS (Consensus)

   $ 53.25      $ 68.00  

Price/2018E EPS (Lennar Management)

   $ 56.00      $ 71.25  

The ranges of implied per share equity values for CalAtlantic common stock were compared to CalAtlantic’s closing share price of $40.45 on October 27, 2017, the proposed cash consideration of $48.26 per share of CalAtlantic common stock and the implied offer price of $51.34 per share of CalAtlantic common stock at the proposed stock consideration exchange ratio of 0.885 per share based on Lennar’s closing share price of $58.01 on October 27, 2017.

The ranges of implied per share equity values for Lennar Class A common stock were compared to Lennar’s closing share price of $58.01 on October 27, 2017.

 

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Discounted Cash Flow Analysis . J.P. Morgan conducted a discounted cash flow analysis for the purpose of determining an implied fully diluted equity value per share for CalAtlantic common stock and Lennar Class A common stock. A discounted cash flow analysis is a method of evaluating an asset using estimates of the future unlevered cash flows generated by the asset and taking into consideration the time value of money with respect to those cash flows by calculating their “present value.” The “unlevered free cash flows” refers to a calculation of the future cash flows generated by an asset without including in such calculation any debt servicing costs. “Present value” refers to the current value of the cash flows generated by the asset, and is obtained by discounting those cash flows back to the present using a discount rate that takes into account macro-economic assumptions and estimates of risk, the opportunity cost of capital and other appropriate factors. “Terminal value” refers to the present value of all future cash flows generated by the asset for periods beyond the periods indicated above.

J.P. Morgan calculated the unlevered free cash flows that each of CalAtlantic and Lennar is expected to generate during the period from the fourth quarter of fiscal year 2017 through the end of 2022 based upon financial projections and extrapolations without Synergies prepared by CalAtlantic management and financial estimates without Synergies prepared by Lennar management and provided to CalAtlantic management, which subsequently reviewed, adjusted and approved such projections or estimates. In particular, for the purposes of developing the discounted cash flow valuation, terminal year projections or estimates for both CalAtlantic and Lennar were developed, reviewed and approved by CalAtlantic management. J.P. Morgan also calculated a range of terminal values of each of CalAtlantic and Lennar at the end of the 5.25-year period ending 2022 by applying a perpetual growth rate ranging from 0.5% to 1.5% to the unlevered free cash flow of each company during the terminal period. The unlevered free cash flows and the range of terminal values were then discounted to present values as of September 30, 2017 for CalAtlantic and August 31, 2017 for Lennar using a range of discount rates from 7.75% to 8.75%. This discount rate range was based upon J.P. Morgan’s analysis of the weighted-average cost of capital of each of CalAtlantic and Lennar.

Based on the foregoing, this analysis indicated the following implied per share equity value range, rounded to the nearest $0.25, for CalAtlantic common stock and Lennar Class A common stock:

 

     Implied Per Share
Equity Value
 
     Low      High  

CalAtlantic

     

Discounted Cash Flow Analysis

   $ 45.75      $ 59.75  

Lennar

     

Discounted Cash Flow Analysis

   $ 55.75      $ 68.75  

The range of implied per share equity values for CalAtlantic common stock was compared to CalAtlantic’s closing share price of $40.45 on October 27, 2017, the proposed cash consideration of $48.26 per share of CalAtlantic common stock and the implied offer price of $51.34 per share of CalAtlantic common stock at the proposed stock consideration exchange ratio of 0.885 per share based on Lennar’s closing share price of $58.01 on October 27, 2017.

The range of implied per share equity values for Lennar Class A common stock was compared to Lennar’s closing share price of $58.01 on October 27, 2017.

Relative Value Analysis. Based upon the implied valuations for each of CalAtlantic and Lennar as derived above under “Public Trading Multiples Analysis” and “Discounted Cash Flow Analysis,” J.P. Morgan calculated a range of implied exchange ratios of a share of CalAtlantic common stock to a share of Lennar Class A common stock, and then compared that range of implied exchange ratios to the proposed stock consideration exchange ratio.

For each of the analyses referred to above, J.P. Morgan calculated the ratio implied by dividing the low end of each range of implied equity values of CalAtlantic by the high end of each range of implied equity values of

 

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Lennar. J.P. Morgan also calculated the ratio implied by dividing the high end of each range of implied equity values of CalAtlantic by the low end of each range of implied equity values of Lennar.

In each case, the implied exchange ratios were compared to the proposed stock consideration exchange ratio of 0.885x and did not include any Synergies. This analysis indicated the following implied exchange ratios:

 

     Range of Implied
Exchange Ratios
 
     Low      High  

Trading Multiples Analysis

     

Price/Tangible Book Value

     0.538x        1.064x  

2018E Price/EPS (Consensus)

     0.563x        0.948x  

2018E Price/EPS (Management)

     0.649x        1.085x  

Discounted Cash Flow Analysis

     0.665x        1.072x  

Miscellaneous . The foregoing summary of certain material financial analyses does not purport to be a complete description of the analyses or data presented by J.P. Morgan. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. J.P. Morgan believes that the foregoing summary and its analyses must be considered as a whole and that selecting portions of the foregoing summary and these analyses, without considering all of its analyses as a whole, could create an incomplete view of the processes underlying the analyses and its opinion. As a result, the ranges of valuations resulting from any particular analysis or combination of analyses described above were merely utilized to create points of reference for analytical purposes and should not be taken to be the view of J.P. Morgan with respect to the actual value of CalAtlantic or Lennar. The order of analyses described does not represent the relative importance or weight given to those analyses by J.P. Morgan. In arriving at its opinion, J.P. Morgan did not attribute any particular weight to any analyses or factors considered by it and did not form an opinion as to whether any individual analysis or factor (positive or negative), considered in isolation, supported or failed to support its opinion. Rather, J.P. Morgan considered the totality of the factors and analyses performed in determining its opinion.

Analyses based upon forecasts of future results are inherently uncertain, as they are subject to numerous factors or events beyond the control of the parties and their advisors. Accordingly, forecasts and analyses used or made by J.P. Morgan are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by those analyses. Moreover, J.P. Morgan’s analyses are not and do not purport to be appraisals or otherwise reflective of the prices at which businesses actually could be acquired or sold. None of the selected companies reviewed as described in the above summary is identical to CalAtlantic or Lennar. The companies were selected, among other reasons, because they are publicly traded companies with operations and businesses that, for purposes of J.P. Morgan’s analysis, may be considered similar to those of CalAtlantic and Lennar. However, certain of these companies may have characteristics that are materially different from those of CalAtlantic and Lennar. The analyses necessarily involve complex considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the companies compared to CalAtlantic and Lennar.

As a part of its investment banking business, J.P. Morgan and its affiliates are continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, investments for passive and control purposes, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements, and valuations for corporate and other purposes. J.P. Morgan was selected to advise CalAtlantic with respect to the proposed Merger on the basis of, among other things, such experience and its qualifications and reputation in connection with such matters and its familiarity with CalAtlantic, Lennar and the industries in which they operate.

CalAtlantic has agreed to pay J.P. Morgan a fee of $40.0 million, $0.3 million of which became payable to J.P. Morgan for advisory services rendered up until the time J.P. Morgan delivered its opinion, $4.0 million of

 

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which became payable to J.P. Morgan at the time J.P. Morgan delivered its opinion and the remainder of which is contingent and payable upon the consummation of the proposed Merger. In addition, CalAtlantic has agreed to reimburse J.P. Morgan for its expenses incurred in connection with its services, including the fees and disbursements of counsel, and will indemnify J.P. Morgan against certain liabilities arising out of J.P. Morgan’s engagement. During the two years preceding the date of this letter, J.P. Morgan and its affiliates have had commercial or investment banking relationships with CalAtlantic and Lennar, for which J.P. Morgan and such affiliates have received customary compensation. Such services during such period have included acting as joint lead arranger and joint lead bookrunner on CalAtlantic’s credit facility in October 2015, as lead-left bookrunner on an offering of debt securities by CalAtlantic in May 2016, as active bookrunner on a sale of equity securities of CalAtlantic in June 2017 (representing MP CA Homes), and as joint bookrunner on an offering of debt securities by CalAtlantic in June 2017; as joint bookrunner on offerings of debt securities by Lennar in October 2015, February 2016 and April 2017, as lead left bookrunner on an offering of debt securities by Lennar in January 2017, and as sole bookrunner and joint lead arranger on Lennar’s credit facility in June 2016 and May 2017. In addition, during such period, J.P. Morgan and its affiliates have provided loan syndication, and debt and equity underwriting services to portfolio companies of MatlinPatterson Global Advisers LLC, which portfolio companies are unrelated to the proposed Transaction. In addition, J.P. Morgan’s commercial banking affiliate is an agent bank and a lender under outstanding credit facilities of CalAtlantic, Lennar and such portfolio companies as are referred to in the preceding sentence, for which it receives customary compensation or other financial benefits. In addition, J.P. Morgan and its affiliates hold, on a proprietary basis, less than 1% of the outstanding common stock of each of CalAtlantic and Lennar. During the two year period ending on September 30, 2017, the aggregate fees received by J.P. Morgan from CalAtlantic were approximately $7 million and from Lennar were approximately $7 million. In the ordinary course of their businesses, J.P. Morgan and its affiliates may actively trade the debt and equity securities or financial instruments of CalAtlantic or Lennar for their own accounts or for the accounts of customers and, accordingly, they may at any time hold long or short positions in such securities or other financial instruments.

Unaudited Prospective Financial Information

CalAtlantic Management’s Unaudited Prospective Standalone Financial Information and the Synergies

CalAtlantic does not, as a matter of course, publicly disclose financial forecasts, due to, among other reasons, the uncertainty of the underlying assumptions and estimates. In connection with CalAtlantic’s consideration and negotiation of a potential transaction with Lennar, in August 2017, CalAtlantic management prepared certain non-public, unaudited internal financial forecasts for CalAtlantic on a standalone basis, for fiscal years 2017 through 2019 regarding CalAtlantic’s revenue, gross margin percent, net income, and earnings per share which we refer to as “EPS.” We refer to these financial forecasts collectively as the “CalAtlantic Financial Forecasts.” In addition, CalAtlantic management extrapolated the CalAtlantic Financial Forecasts (other than EPS) for fiscal years 2020 through 2022 based on CalAtlantic management’s assumptions regarding industry growth and stage of the homebuilding cycle expected during such period. We refer to such extrapolated financial forecasts as the “CalAtlantic Extrapolations,” and we refer to the CalAtlantic Financial Forecasts and the CalAtlantic Extrapolations together as the “CalAtlantic Projections.” CalAtlantic management also prepared the Synergies. The Synergies are calculated as cost savings from synergies, net of related synergy implementation costs, and were prepared based on discussions with Lennar management assuming a phase-in of such synergies through fiscal year 2019. The CalAtlantic Projections were prepared based on a stand-alone capital plan for CalAtlantic, including assumptions regarding CalAtlantic’s plans for future share repurchases, debt financings and dividend policies. CalAtlantic provided the CalAtlantic Projections and the Synergies to J.P. Morgan and the CalAtlantic board of directors. As a result, CalAtlantic has included below a summary of the CalAtlantic Projections and the Synergies to provide its stockholders access to certain formerly non-public information that was considered by the CalAtlantic board of directors and J.P. Morgan in connection with its financial analysis. In connection with the due diligence review of CalAtlantic by Lennar, CalAtlantic’s management also provided certain of the CalAtlantic Projections for fiscal years 2017 through 2019 to Lennar and its financial advisor.

 

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The CalAtlantic Projections include revenue, gross margin, net income, and EPS for CalAtlantic on a standalone basis. Unlevered free cash flow was also calculated based on the CalAtlantic Projections. Unlevered free cash flow refers to a calculation of the future cash flows generated by an asset without including in such calculation any debt servicing costs.

A summary of the CalAtlantic Projections discussed above, which includes both the CalAtlantic Financial Forecasts for fiscal years 2017 through 2019 and the CalAtlantic Extrapolations for fiscal years 2020 through 2022, is presented below:

 

     Year Ending December 31,
($ in millions, except EPS)
 
     2017E     2018E     2019E     2020E     2021E     2022E  

Homebuilding Revenue

   $ 6,682     $ 8,092     $ 8,722     $ 8,985     $ 9,166     $ 9,350  

Homebuilding Gross Margin, %

     20.1     20.9     21.0     21.0     21.0     21.0

Net Income (1)

     448       575       639       658       672       685  

Unlevered Free Cash Flow (2)(3)

     355       491       677       570       648       661  

EPS

       4.86       5.72        

 

(1) Includes income from homebuilding, financial services, land sales and other income.
(2) The estimated terminal unlevered free cash flow of CalAtlantic (not presented in the table above) was $733 million. Unlevered Free Cash Flow (including such estimated terminal unlevered free cash flow) was calculated by J.P. Morgan based on the CalAtlantic Projections for purposes of J.P. Morgan’s discounted cash flow analysis in connection with its opinion delivered to the CalAtlantic board of directors on October 29, 2017. J.P. Morgan’s Unlevered Free Cash Flow calculation was provided to CalAtlantic management, which subsequently reviewed and approved such projections. These Unlevered Free Cash Flow calculations were not provided to Lennar.

 

(3) Unlevered Free Cash Flow for 2017 is solely for CalAtlantic’s 2017 fiscal fourth quarter.

Summary of the Synergies

A summary of the Synergies discussed above for fiscal years 2017 through 2022 is presented below:

 

     Year Ending December 31,
($ in millions)
 
     2017E      2018E      2019E      2020E      2021E      2022E  

Total Post-Tax Synergies (1)

   $ 0      $ 83      $ 247      $ 250      $ 252      $ 255  

 

(1) The Synergies consist of net cost synergies and are presented on a post-tax basis, assuming a phase-in through fiscal year 2019.

Summary of CalAtlantic’s Adjustments to Lennar Standalone Financial Estimates

Lennar has never prepared multi-year projections. The only projections Lennar prepares in the ordinary course are projections for the forthcoming fiscal year, prepared at the beginning of that fiscal year, which are not disclosed to the public. With regard to 2018, by the time the merger agreement was signed, Lennar had not completed its budgeting process for 2018, and therefore did not yet have fiscal 2018 projections. However, at the request of CalAtlantic, Lennar provided to CalAtlantic, for use in the course of its due diligence, non-public estimates by Lennar personnel of future operating results and financial condition based on preliminary divisional business plans for fiscal years 2017 through 2022, which we refer to as the “Lennar Financial Estimates.” The Lennar Financial Estimates did not constitute projections and were not subject to the type of detailed analysis that would be involved in the preparation of projections. Also, the Lennar Financial Estimates were prepared before Hurricanes Harvey and Irma, and did not reflect resulting deferrals of home deliveries which had been

 

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expected in fiscal 2017. CalAtlantic management reviewed the Lennar Financial Estimates in connection with its diligence, but for purposes of providing the estimates to J.P. Morgan for use in its financial analyses, rather than using the Lennar Financial Estimates for fiscal years 2020 through 2022, CalAtlantic’s management extrapolated Lennar’s estimates for fiscal years 2018 and 2019 to prepare forecasts for fiscal years 2020 through 2022, with such extrapolations based on the same assumptions used by CalAtlantic’s management in preparing the CalAtlantic Extrapolations regarding the industry’s long term average growth. We refer to the Lennar Financial Estimates, as adjusted by CalAtlantic’s management, as the “Adjusted Lennar Financial Estimates.” The Adjusted Lennar Financial Estimates were provided to J.P. Morgan and the CalAtlantic board of directors.

The following sets forth the EPS estimates, provided by Lennar for fiscal years 2018 and 2019, and the unlevered free cash flow prepared based on the Adjusted Lennar Financial Estimates as described above. The unlevered free cash flow calculation includes financials for Lennar’s Homebuilding and Financial Services segments only, and excludes Lennar’s ownership of Rialto and Multifamily businesses, as well as unconsolidated joint ventures. Such businesses and investments were valued separately. The following unlevered free cash flow calculations are based on the unadjusted Lennar Financial Estimates for fiscal years 2018 and 2019 and the Adjusted Lennar Financial Estimates for fiscal years 2020 through 2022:

 

     Year Ending November 30,
($ in millions, except EPS)
 
     2017E      2018E      2019E      2020E      2021E      2022E  

Unlevered Free Cash Flow (1)

      $ 877      $ 1,117      $ 1,032      $ 1,138      $ 1,151  

EPS

        5.08        5.86           

 

(1) The estimated terminal unlevered free cash flow of Lennar was $1,306 million. Unlevered Free Cash Flow (including such estimated terminal unlevered free cash flow) was calculated by J.P. Morgan based on the Adjusted Lennar Financial Estimates for purposes of J.P. Morgan’s discounted cash flow analysis in connection with its opinion delivered to the CalAtlantic board of directors on October 29, 2017. J.P. Morgan’s Unlevered Free Cash Flow calculation was provided to CalAtlantic management, which subsequently reviewed and approved such projections.

The CalAtlantic Projections, the Adjusted Lennar Financial Estimates and the Synergies are subjective in many respects and, thus, subject to interpretation. Although presented with numeric specificity, the CalAtlantic Projections, the Adjusted Lennar Financial Estimates and the Synergies reflect numerous estimates and assumptions with respect to industry performance and competition, general business, economic, market and financial conditions, matters specific to CalAtlantic’s and Lennar’s businesses, and the effects of the Merger as they relate to the Synergies including the factors set forth in the section titled “Risk Factors” beginning on page 26, all of which are difficult to predict and many of which are beyond CalAtlantic’s or Lennar’s control. CalAtlantic cannot provide any assurance that the assumptions underlying the CalAtlantic Projections, the Adjusted Lennar Financial Estimates or the Synergies will be realized.

Many of the assumptions reflected in the CalAtlantic Projections, the Adjusted Lennar Financial Estimates and the Synergies are subject to change and such projections and estimates do not reflect revised prospects for CalAtlantic’s or Lennar’s business as a result of the Merger, changes in general business or economic conditions or any other transaction or event that has occurred or that may occur and that was not anticipated at the time such financial information was prepared. Important factors that may affect actual results or the achievability of the projections or estimates include, but are not limited to, those risks and uncertainties described in CalAtlantic’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and Lennar’s Annual Report on Form 10-K for the fiscal year ended November 30, 2016, as well as those set forth in the section titled “Risk Factors” in this joint proxy statement/prospectus beginning on page 26. CalAtlantic has not updated and does not intend to update or otherwise revise the CalAtlantic Projections, the Adjusted Lennar Financial Estimates or the Synergies. There can be no assurance that the results reflected in any of the CalAtlantic Projections, the Adjusted Lennar Financial Estimates or the Synergies will be realized or that actual results will not materially differ from

 

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such projections and estimates. In addition, the CalAtlantic Projections and the Synergies cover multiple years and such information by its nature becomes less predictive with each successive year. Therefore, the CalAtlantic Projections and the Synergies included in this joint proxy statement/prospectus should not be relied on as necessarily predictive of actual future events nor construed as financial guidance.

CalAtlantic stockholders and Lennar stockholders are urged to review CalAtlantic’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and Lennar’s Annual Report on Form 10-K for the fiscal year ended November 30, 2016 and CalAtlantic’s and Lennar’s subsequently filed reports with the SEC for descriptions of risk factors with respect to CalAtlantic’s and Lennar’s businesses. You should read “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 36, “Risk Factors” beginning on page 26, and “Where You Can Find More Information” beginning on page 133 for additional information regarding the risks inherent in forward-looking information such as the CalAtlantic Projections and the Adjusted Lennar Financial Estimates.

The CalAtlantic Projections, the Adjusted Lennar Financial Estimates and the Synergies were not prepared with a view toward public disclosure but rather for the purpose of evaluating the proposed transaction between CalAtlantic and Lennar. Accordingly, the CalAtlantic Projections, the Adjusted Lennar Financial Estimates and the Synergies do not comply with GAAP (including because certain metrics are non-GAAP measures, and such projections and estimates do not include footnote disclosures as may be required by GAAP), the published guidelines of the SEC regarding projections or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. The CalAtlantic Projections, the Adjusted Lennar Financial Estimates and the Synergies have been prepared by, and are the responsibility of CalAtlantic’s management. Neither CalAtlantic’s nor Lennar’s independent registered public accounting firm, nor any other independent accountants, have audited, compiled, examined, reviewed or performed any agreed-upon procedures with respect to the CalAtlantic Projections, the Adjusted Lennar Financial Estimates or the Synergies, nor have they expressed any opinion or any other form of assurance on such projections or estimates or the achievability of the results reflected in such projections or estimates, and they assume no responsibility for, and disclaim any association with, such projections or estimates. The report of CalAtlantic’s independent registered public accounting firm incorporated by reference into this joint proxy statement/prospectus relates only to CalAtlantic’s historical financial information and no such report extends to the prospective financial information or should be read to do so. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures such as those used in the CalAtlantic Projections, the Adjusted Lennar Financial Estimates and the Synergies may not be comparable to similarly titled amounts used by other companies or persons. The non-GAAP financial measures set forth above should not be considered a substitute for, or superior to, financial measures determined or calculated in accordance with GAAP.

For the reasons described above, readers of this joint proxy statement/prospectus are cautioned not to place undue, if any, reliance on the CalAtlantic Projections, the Adjusted Lennar Financial Estimates and the Synergies. Neither CalAtlantic nor Lennar has made any representation to the other in the merger agreement concerning any such projections or estimates.

The CalAtlantic Projections and the Adjusted Lennar Financial Estimates do not give effect to the Merger and the other transactions contemplated by the merger agreement or any changes to Lennar’s operations or strategy that may be implemented after the completion of the Merger, including any potential synergies expected to be realized as a result of the Merger and the other transactions contemplated by the merger agreement, to any disruption to CalAtlantic’s or Lennar’s business caused by the announcement of the Merger, or to any costs related to, or that may arise in connection with, the Merger and the other transactions contemplated by the merger agreement, including the effect of any failure of the Merger to occur.

CALATLANTIC DOES NOT INTEND TO UPDATE OR OTHERWISE REVISE THE ABOVE PROJECTIONS, ADJUSTED ESTIMATES OR SYNERGIES TO REFLECT CIRCUMSTANCES

 

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EXISTING AFTER THE DATE WHEN MADE, INCLUDING EVENTS OR CIRCUMSTANCES THAT MAY HAVE OCCURRED DURING THE PERIOD BETWEEN THAT DATE AND THE DATE OF THIS JOINT PROXY STATEMENT/PROSPECTUS, OR TO REFLECT THE OCCURRENCE OF FUTURE EVENTS, EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING SUCH FORECASTS ARE NOT BEING REALIZED.

Board of Directors and Executive Officers of Lennar After Completion of the Merger

The persons who currently are the Lennar directors and executive officers are expected to continue as Lennar directors and executive officers after the Merger. The current members of the Lennar board are Irving Bolotin, Steven L. Gerard, Theron I. (“Tig”) Gilliam, Sherrill W. Hudson, Sidney Lapidus, Teri McClure, Stuart Miller, Armando Olivera, Donna Shalala and Jeffrey Sonnenfeld. The merger agreement provides that effective at the time of the Merger, Scott D. Stowell, who currently is the Executive Chairman of CalAtlantic, will be added to the Lennar board.

Information about Lennar’s current directors and executive officers is contained in Lennar’s Report on Form 10-K for the year ended November 30, 2016 and the proxy statement dated March 7, 2017 relating to Lennar’s 2017 Annual Meeting of Stockholders. Information about Scott Stowell is contained in CalAtlantic’s proxy statement dated March 31, 2017 relating to CalAtlantic’s 2017 Annual Meeting of Stockholders. The Lennar Report on Form 10-K and the Lennar and CalAtlantic proxy statements all are incorporated by reference into this joint proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 133.

Accounting Treatment of the Merger

In accordance with GAAP, Lennar will account for the Merger using the acquisition method of accounting, with Lennar being considered the acquiror of CalAtlantic for accounting purposes. This means that Lennar will allocate the purchase price to the fair value of CalAtlantic’s tangible and intangible assets and liabilities at the acquisition date, with the excess purchase price, if any, being recorded as goodwill. Under the acquisition method of accounting, goodwill is not amortized but is tested for impairment at least annually.

Regulatory Approvals Required for the Merger

Lennar and CalAtlantic have determined that the Merger is not subject to the filing requirements of the HSR Act, and no other filings, approvals or consents from federal or state antitrust authorities are required in order to consummate the Merger. The Merger may require that notifications be given to governmental agencies that have issued licenses that are held by CalAtlantic and its subsidiaries and other governmental agencies.

The shares of Lennar Class A and Class B common stock that will be issued to CalAtlantic stockholders as a result of the Merger must be approved for listing on the NYSE, subject to official notice of issuance.

Restrictions on Sales of Shares of Lennar Class A and Class B Common Stock Received in the Merger

Except as set forth below, all shares of Lennar Class A and Class B common stock received by CalAtlantic stockholders as a result of the Merger will be freely tradable for purposes of the Securities Act and the Exchange Act unless CalAtlantic stockholders to whom shares are issued are “affiliates” of Lennar, which Lennar does not believe will be the case, except possibly with regard to Scott Stowell, who will become a director of Lennar. If any CalAtlantic stockholder is an affiliate of Lennar, this joint proxy statement/prospectus does not cover resales of shares received as a result of the Merger.

MP CA Homes has agreed in a Voting and Cash Election Agreement, dated October 29, 2017 between MP CA Homes and Lennar, which we refer to as the “MP CA Homes Agreement,” that if as a result of the Merger, it receives 5% or more of the Lennar Class A common stock that will be outstanding immediately after the Merger, until 90 days after the Merger becomes effective, MP CA Homes will not sell or otherwise transfer

 

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any shares of Lennar Class A common stock. After that, there will be no restriction under the MP CA Homes Agreement against MP CA Homes’ selling or otherwise transferring Lennar common stock.

No Appraisal Rights

Appraisal rights are statutory rights that, if applicable, enable stockholders to dissent from an extraordinary transaction, such as a merger, and to demand that the corporation pay the fair value for their shares as determined by a court in a judicial proceeding instead of receiving the consideration being paid or issued to stockholders in connection with the extraordinary transaction.

Appraisal rights are not available in all circumstances, and exceptions to these rights are provided under the DGCL. Section 262 of the DGCL provides that stockholders have the right, in some circumstances, to dissent from certain corporate actions and to instead demand payment of the fair value of their shares. Stockholders do not have appraisal rights with respect to shares of any class or series of stock if such shares of stock, or depositary receipts in respect thereof, are either (i) listed on a national securities exchange or (ii) held of record by more than 2,000 holders, unless the stockholders are required to receive in exchange for their shares anything other than shares of stock of the surviving or resulting corporation (or depositary receipts in respect thereof), or of any other corporation that is publicly listed or held by more than 2,000 holders of record, cash in lieu of fractional shares or fractional depositary receipts described above or any combination of the foregoing. Therefore, because CalAtlantic stockholders are not required to accept in the Merger any consideration in exchange for their shares of CalAtlantic common stock other than Lennar Class A common stock and Class B common stock, both of which are listed on the NYSE, and cash in lieu of fractional shares (if applicable), holders of CalAtlantic common stock will not be entitled to any appraisal rights in connection with the Merger with respect to their shares of CalAtlantic common stock.

NYSE Listing of Lennar Stock; Delisting and Deregistration of CalAtlantic Common Stock

It is a condition to the obligations of each party to complete the Merger that the shares of Lennar stock to be issued in the Merger have been approved for listing on the NYSE, subject to notice of issuance. Lennar is required to use its reasonable best efforts to cause all the conditions to the parties’ obligations (which includes the condition regarding approval for listing on the NYSE) to be fulfilled.

If the Merger is completed, CalAtlantic’s common stock will cease to be listed on the NYSE and its registration under the Exchange Act will be terminated.

Interests of CalAtlantic Directors and Executive Officers in the Merger

In considering the recommendation of the CalAtlantic board of directors that you vote to adopt the merger agreement, you should be aware that CalAtlantic’s executive officers and directors have economic interests in the Merger that are different from, or in addition to, those of CalAtlantic’s stockholders generally. CalAtlantic’s board of directors was aware of and considered those interests, among other matters, in reaching its decisions to (i) approve the Merger and the other transactions contemplated by the merger agreement, (ii) adopt, approve and declare advisable the merger agreement, and (iii) resolve to recommend the approval of the merger agreement to CalAtlantic stockholders. The transactions contemplated by the merger agreement will be a “change in control” for purposes of the CalAtlantic executive compensation arrangements described below.

Certain Assumptions

Except as otherwise specifically noted, for purposes of quantifying the potential payments and benefits described in this section, the following assumptions were used:

 

    The value of the per share merger consideration is $49.13 for each CalAtlantic share based on the average closing price per CalAtlantic share over the five business days following the first public announcement of the transaction on October 30, 2017.

 

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    The effective time is November 1, 2017, which is the assumed date of the closing of the Merger solely for purposes of the disclosure in this section.

 

    Each executive officer of CalAtlantic was terminated by CalAtlantic without “cause” or resigned for “good reason” (as such terms are defined in the relevant agreements) in connection with the Merger, in either case immediately following the assumed effective time of November 1, 2017.

Change in Control and Severance Arrangements

Following is a description of the severance and change in control arrangements between CalAtlantic and each named executive officer.

Change of Control Arrangements with Mr. Nicholson .

Mr. Nicholson, CalAtlantic’s Chief Executive Officer and President, has entered into two severance agreements with CalAtlantic, an executive severance agreement and a CEO severance agreement. Severance payments to Mr. Nicholson in connection with a qualifying termination within a “change of control period” may be made pursuant to either the CEO severance agreement or the executive severance agreement, whichever would convey the greater economic benefit to Mr. Nicholson, but not both.

Pursuant to the executive severance agreement, during a “change of control period,” if Mr. Nicholson’s employment is terminated without “cause” or if Mr. Nicholson resigns for “good reason,” Mr. Nicholson will have the right to receive: (i) a pro rata bonus through the date of termination based on the target annual bonus for the year in which termination occurs or in the absence of a specified target annual bonus for that year, the highest bonus he earned in any of the three years prior to termination, plus an amount equal to two times the highest “annual compensation” paid to him for any of the three years prior to termination, (ii) acceleration and payment of any outstanding equity and incentive awards, (iii) participation in the life, accident and health insurance, employee welfare benefit and executive medical reimbursement plans in which he currently participates at the sole cost of CalAtlantic for a period of two years following his termination of employment, (iv) a lump sum cash payment for two years of continued participation in the personal health and services allowance provided to him prior to the change of control, (v) reimbursement for the costs of relocating in order to pursue professional or career opportunities within two years after termination, including taxes payable on the reimbursement, any costs or commissions related to selling his home, and all moving expenses and any other benefits provided by CalAtlantic under its relocation program, and (vi) reimbursement for outplacement services used within two years of the date of termination of up to 25% of his annual compensation for the calendar year prior to the date of termination or, in lieu of such reimbursement, a lump sum cash payment equal to 10% of his “annual compensation” for the calendar year immediately preceding termination of employment. “Annual compensation” means the sum of Mr. Nicholson’s annual base salary and bonus paid or earned (even if paid in a subsequent year), and all amounts credited to him, vested and unvested, under any incentive compensation or other benefit or compensation plan, including long-term and equity incentive award plans during the year.

Pursuant to the CEO severance agreement, if Mr. Nicholson’s employment is terminated without “cause,” Mr. Nicholson will have the right to receive: (i) a pro rata share of his annual bonus incentive payment for the year in which the termination occurs and payment of all benefits to which he has a vested right at the time of termination, (ii) a lump sum cash payment equal to the aggregate amount of 24 months of his annual base salary as in effect prior to the date of notice of termination, (iii) a lump sum cash payment equal to two times the highest amount of annual bonus incentive payment paid or payable in the three previous years prior to the year of termination, (iv) an equity award equal to the highest restricted stock unit award granted during the three previous years (or a lump sum cash payment in an amount equal to the fair market value of such shares if such award cannot be made), (v) acceleration and payment of any outstanding equity and incentive awards, (vi) continued participation in the life, medical, dental, vision, AD&D, prescription drug, and long-term disability programs in which he participates prior to termination for a period of two years following termination of employment or equivalent benefits for the same period, and (vii) a lump sum cash payment equal to the value of

 

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coverage under the executive life insurance program as well as the value of the personal health services allowance for a period of 24 months.

Change in Control Protection Agreement with Mr. Stowell .

Mr. Stowell, CalAtlantic’s Executive Chairman, is a party to a severance and change in control protection agreement with CalAtlantic. Under this agreement, if his employment with CalAtlantic is terminated without “cause” (cause generally consisting of various bad acts described more particularly in the agreement) or by Mr. Stowell for “good reason” (generally consisting of adverse changes in responsibilities, compensation, benefits or location of work place) in connection with a change in control ( i.e. , “double-trigger” required for payouts), he is entitled to receive a lump sum payment equal to three times the sum of his current base salary plus his target bonus for the year of termination, COBRA paid by CalAtlantic for three years and an additional pro-rata bonus. The amount of the pro-rata bonus is determined by multiplying his target bonus for the year of termination by the quotient obtained by dividing the number of days in the year up to and including the date of termination by 365. In addition, all unvested equity awards will vest as of the date of termination.

Change of Control and Severance Arrangement with Mr.  Skelly . Mr. Skelly has entered into an executive severance agreement with CalAtlantic. Pursuant to this agreement, in the event that his employment is terminated by CalAtlantic without “cause” or Mr. Skelly resigns for “good reason” during a “change of control period,” Mr. Skelly will have the right to receive a lump sum cash payment equal to a pro rata bonus through the date of termination based on the target annual bonus for the year in which termination occurs or in the absence of a specified target annual bonus for that year, the highest bonus earned by him in any of the last three years prior to termination, plus an amount equal to two times the highest “annual compensation” paid to him for any of the three years prior to termination. In addition to these benefits, upon a qualifying termination, he will have the right to receive (i) acceleration and payment of any outstanding equity and incentive awards, (ii) participation in the life, accident and health insurance, employee welfare benefit and executive medical reimbursement plans in which he then participates at the sole cost of CalAtlantic for a period of two years following termination of employment, (iii) a lump sum cash payment for two years of continued participation in the personal health and services allowance provided to him prior to the change of control, (iv) reimbursement for the costs of relocating in order to pursue professional or career opportunities within two years after termination, including taxes payable on the reimbursement, any costs or commissions related to selling his home, and all moving expenses and any other benefits provided by CalAtlantic under its relocation program, and (v) the right to receive reimbursement for outplacement services used within two years of the date of termination of up to 25% of his “annual compensation” for the calendar year prior to the date of termination or, in lieu of such reimbursement, a lump sum cash payment equal to 10% of his “annual compensation” for the calendar year immediately preceding termination of employment. Concurrently with the execution of the merger agreement, CalAtlantic entered into an amendment of this executive severance agreement with Mr. Skelly to provide that, in the event that Mr. Skelly’s employment is terminated in a manner entitling him to outplacement benefits, in lieu of such benefits Mr. Skelly will be entitled to receive a lump sum cash payment equal to the maximum amount he could have been reimbursed for under the executive severance agreement. This amendment is contingent upon the Merger having been consummated prior to December 31, 2018, and will be null and void if the Merger is not consummated by that date.

The “change of control period” for Mr. Skelly’s executive severance agreement begins on the date CalAtlantic (or a successor) becomes aware of or enters into discussions or negotiations that could involve a “change of control” and ends on the earlier of two years after the effective date of a “change of control” or the date on which a “change of control” is no longer discussed or proposed to occur. For purposes of his executive severance agreement, “annual compensation” means the sum of Mr. Skelly’s annual base salary and bonus paid or earned (even if paid in a subsequent year), and all amounts credited to him, vested and unvested, under any incentive compensation or other benefit or compensation plan, including long-term and equity incentive award plans during the year.

 

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Change in Control and Severance Protection Agreement with Jeff McCall, Wendy Marlett and John P. Babel. Jeff J. McCall, Wendy L. Marlett and John P. Babel have entered into change in control and severance protection agreements. The agreements have a two year term with a rolling one year extension.

If the executive’s employment with CalAtlantic is terminated by CalAtlantic without “cause” or by the executive for good reason (generally consisting of adverse changes in responsibilities, compensation, benefits or location of work place) in connection with a change in control ( i.e. , “double-trigger” required for payouts), the executive is entitled to receive a lump sum payment equal to two times the sum of his or her current base salary plus his or her target bonus for the year of termination, COBRA paid by CalAtlantic for two years, an outplacement benefit, and an additional pro-rata bonus. The amount of the pro-rata bonus is determined by multiplying his or her target bonus for the year of termination by the quotient obtained by dividing the number of days in the year up to and including the date of termination by 365. In addition, all unvested equity awards will vest as of the date of termination.

Retention Arrangements

Concurrently with the execution of the merger agreement, CalAtlantic entered into retention letter agreements with each of Scott D. Stowell, Jeff J. McCall, Wendy L. Marlett, and John P. Babel (the “Retention Agreements”). The Retention Agreements provide for the payment to each executive of the following lump sum cash retention bonus on the date the Merger is consummated so long as the executive either remains employed with CalAtlantic through the consummation of the Merger, or is terminated prior to the consummation of the Merger by CalAtlantic without “cause” at the request of Lennar: Scott D. Stowell: $8,250,000, Jeff J. McCall: $3,050,000, Wendy L. Marlett: $2,000,000, and John P. Babel: $2,250,000. The bonuses under the Retention Agreements are in addition to, and not in lieu of, other payments due and payable under CalAtlantic’s employee benefit plans and/or any other agreement between each executive and CalAtlantic. Payment under the Retention Agreements is contingent upon the completion of the Merger prior to December 31, 2018, and will be null and void if the Merger is not consummated by that date.

Equity Compensation

At the effective time, the outstanding CalAtlantic options, restricted stock units and SARs held by CalAtlantic’s executive officers that convert into equity awards with respect to Lennar shares in the manner described above will remain subject to the same service-based vesting conditions; provided, however, that if an executive officer’s employment is terminated, other than for “cause,” on or prior to the first anniversary of the effective time, the assumed outstanding equity awards will fully vest upon such termination. Other than such accelerated vesting and the vesting provided for under the severance and change in control protection agreements described above, there will not be any acceleration or vesting of any equity awards outstanding under CalAtlantic’s equity incentive plans as a result of the Merger.

Indemnification; Directors’ and Officers’ Insurance

In the merger agreement, Lennar and Merger Sub have agreed that all rights of indemnification, advancement of expenses, exculpation and limitation of liabilities existing in favor of persons who are at the effective time of the Merger are current or former directors, officers and employees of CalAtlantic and its subsidiaries that are provided in CalAtlantic’s certificate of incorporation and bylaws or similar organizational documents of any subsidiary of CalAtlantic or under any indemnification, employment or other similar agreements between any indemnified party and CalAtlantic or any subsidiary of CalAtlantic, in each case as in effect on the date of the merger agreement will, with respect to matters occurring at or prior to the effective time of the Merger, survive the Merger and continue in full force and effect in accordance with their respective terms.

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exculpation, indemnification and advances of expenses of indemnified parties for periods at or prior to the effective time than are set forth in the certificate of incorporation and the bylaws of CalAtlantic as of the date of the merger agreement.

In the merger agreement, Lennar has guaranteed the indemnification and expense advancement obligations of CalAtlantic and its subsidiaries that survive the Merger under those provisions of CalAtlantic’s certificate of incorporation or bylaws. Lennar will, or will cause the company that survives the Merger to, maintain in effect for not less than six years after the effective time of the Merger, with respect to occurrences at or prior to the effective time of the Merger, CalAtlantic’s policies of directors’ and officers’ liability insurance that were in effect on the date of the merger agreement (notwithstanding any provisions of those policies that they will terminate as a result of the Merger), or substantially similar insurance, which in each case will cover each person covered by CalAtlantic’s current directors’ and officers’ liability insurance, to the extent that insurance is available at an annual cost not exceeding 200% of the annual cost of the policies of directors and officers liability insurance that were in effect at the date of the merger agreement. To the extent that insurance is not available at an annual cost that will not exceed that amount, Lennar will, or will cause the company that survives the Merger to, maintain in effect for that period the maximum amount of insurance coverage that can be obtained for that maximum annual cost.

Quantification of Potential Payments and Benefits to CalAtlantic’s Named Executive Officers in Connection with the Merger

The information set forth in the table below is intended to comply with Item 402(t) of the SEC’s Regulation S-K, which requires disclosure of information about certain compensation for each named executive officer of CalAtlantic that is based on, or otherwise relates to, the Merger, which is referred to as the merger-related compensation. For additional details regarding the terms of the payments and benefits described below, see the section entitled “Interests of CalAtlantic’s Directors and Executive Officers in the Merger” above.

The amounts shown in the table below are estimates based on multiple assumptions that may or may not actually occur or be accurate on the relevant date, including the assumptions described below and in the footnotes to the table, and do not reflect certain compensation actions that may occur before completion of the Merger. For purposes of calculating such amounts, the following assumptions were used:

 

    the value of the per share merger consideration is $49.13 for each CalAtlantic share based on the average closing price per CalAtlantic share over the five business days following the first public announcement of the transaction on October 30, 2017.

 

    The effective time is November 1, 2017, which is the assumed date of the closing of the Merger solely for purposes of the disclosure in this section.

 

    Each executive officer of CalAtlantic was terminated by CalAtlantic without “cause” or resigned for “good reason” (as such terms are defined in the relevant agreements) in connection with the Merger, in either case immediately following the assumed effective time of November 1, 2017.

As a result of the foregoing assumptions, the actual amounts, if any, to be received by a named executive officer may materially differ from the amounts set forth below.

 

Name

   Cash (1)      Equity (2)      Pension/NQDC (3)      Perquisites/Benefits (4)      Total  

Larry T. Nicholson

     19,975,819        15,726,906        —          1,160,663        36,863,388  

Scott D. Stowell

     19,880,137        12,757,013        —          52,893        32,690,043  

Peter G. Skelly

     7,493,987        5,502,953        —          1,057,681        14,054,621  

Jeff J. McCall

     6,676,712        4,858,449        —          99,515        11,634,676  

Wendy L. Marlett

     4,476,027        2,224,365        —          66,217        6,766,609  

 

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(1) Cash.

Mr.  Nicholson. The amount set forth for Mr. Nicholson includes the following: (i) $2,089,041 representing a pro rata bonus through the assumed effective time of November 1, 2017 based on his target annual bonus for 2017, plus (ii) $17,886,778 representing an amount equal to two times the highest “annual compensation” (as described above) paid to him for any of the three years prior to termination.

Mr.  Stowell. The amount set forth for Mr. Stowell includes the following: (i) $9,750,000 representing three times the sum of his current base salary plus his target bonus for 2017, (ii) $1,880,137 representing a pro-rata bonus, determined by multiplying his target bonus for 2017 by the quotient obtained by dividing the number of days in the year up to and including the date of termination by 365, and (iii) $8,250,000 pursuant to his retention agreement described above.

Mr.  Skelly. The amount set forth for Mr. Skelly includes the following: (i) $647,603 representing a pro rata bonus through the date of termination based on his target annual bonus for 2017, plus (ii) $6,846,384 representing an amount equal to two times the highest “annual compensation” (as described above) paid to him for any of the three years prior to termination.

Mr.   McCall . The amount set forth for Mr. McCall includes the following: (i) $3,000,000 representing two times the sum of his current base salary plus his target bonus for 2017, (ii) $626,712 representing an additional pro-rata, determined by multiplying his target bonus for 2017 by the quotient obtained by dividing the number of days in the year up to and including the date of termination by 365, and (iii) $3,050,000 pursuant to his retention agreement described above.

Ms. Marlett . The amount set forth for Ms. Marlett includes the following: (i) $2,100,000 representing two times the sum of her current base salary plus her target bonus for 2017, (ii) $376,027 representing an additional pro-rata, determined by multiplying her target bonus for 2017 by the quotient obtained by dividing the number of days in the year up to and including the date of termination by 365, and (iii) $2,000,000 pursuant to her retention agreement described above.

(2) Equity .

Pursuant to the terms of the severance and change in control protection agreements described above, each named executive officer would be entitled to accelerated vesting of his or her outstanding equity awards upon a “double trigger” qualifying termination. We have assumed that the named executive officers will experience a qualifying termination in connection with the Merger. The value of the unvested and accelerated stock options and stock appreciation rights is the difference between the value of $49.13 per share and the exercise price of the stock option or stock appreciation right (as applicable), multiplied by the number of unvested shares as of November 1, 2017 and the value of the unvested and accelerated RSUs is equal to $49.13 multiplied by the number of unvested RSUs as of November 1, 2017 (assuming that RSUs subject to performance-based vesting criteria vest at the target performance level), in each case, consistent with the methodology applied under SEC Regulation S-K Item 402(t)(2). The amounts in this column for the unvested and accelerated stock options, stock appreciation rights and RSUs do not reflect any taxes payable by the named executive officers. For further details regarding the treatment of CalAtlantic equity awards in connection with the Merger, see the section entitled “Interests of CalAtlantic’s Directors and Executive Officers in the Merger—Equity Compensation.” The value of each such benefit is shown in the following table:

 

Name

   Value of Unvested
Stock Option
     Value of Unvested
SARs
     Value of Unvested
RSUs
     Value of Unvested
PSUs
 

Larry T. Nicholson

     —          —          4,826,040        10,900,866  

Scott D. Stowell

     —          460,314        4,195,751        8,100,948  

Peter G. Skelly

     —          —          1,777,229        3,725,724  

Jeff J. McCall

     —          184,122        1,607,141        3,067,186  

Wendy L. Marlett

     —          75,615        739,308        1,409,442  

 

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(3) Pension/NQDC .

None of the named executive officers will receive any increased pension or non-qualified deferred compensation benefits in connection with the Merger.

(4) Perquisites/Benefits .

Mr.  Nicholson. The amount set forth for Mr. Nicholson includes the following: (i) $76,324 representing participation in the life, accident and health insurance, employee welfare benefit and executive medical reimbursement plans in which he currently participates at the sole cost of CalAtlantic for a period of two years following his termination of employment, (ii) $190,000 representing a lump sum cash payment for two years of continued participation in the personal health and services allowance provided to him prior to the Merger, and (iii) $894,339 for outplacement services representing an amount equal to 10% of his “annual compensation” (as described above) for the calendar year immediately preceding termination of employment.

Mr.  Stowell. The amount set forth for Mr. Stowell represents COBRA paid by CalAtlantic for three years following a qualifying termination in connection with the Merger.

Mr.  Skelly. The amount set forth for Mr. Skelly includes the following: (i) $54,633 representing participation in the life, accident and health insurance, employee welfare benefit and executive medical reimbursement plans in which he then participates at the sole cost of CalAtlantic for a period of two years following termination of employment, (ii) $147,250 representing a lump sum cash payment for two years of continued participation in the personal health and services allowance provided to him prior to the change of control, and (iii) $855,798 representing the maximum amount Mr. Skelly would be eligible to receive for outplacement services under his executive severance agreement.

Mr.  McCall and Ms.  Marlett . The amounts set forth for Mr. McCall and Ms. Marlett includes the following: (i) $49,515 and $16,217, respectively, representing COBRA paid by CalAtlantic for two years and (ii) $50,000 each, representing the maximum amount each would be eligible to receive for outplacement services under their respective change in control protection agreements.

The CalAtlantic board of directors unanimously recommends that you vote “ FOR ” approval of the CalAtlantic Merger Proposal. Proxies will be voted “ FOR ” the CalAtlantic Merger Proposal unless otherwise specified.

 

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CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS

General

The following discussion summarizes the material U.S. federal income tax consequences of the Merger to a U.S. holder (as defined below) of CalAtlantic common stock who exchange shares of CalAtlantic common stock for cash, shares of Lennar common stock, or cash and shares of Lennar common stock in the Merger. For purposes of this discussion, the term “U.S. holder” refers to a beneficial owner that is:

 

    an individual who is a citizen or resident of the United States;

 

    a corporation, or other entity subject to tax as a corporation for U.S. federal tax purposes, created or organized in or under the laws of the United States or any state thereof or the District of Columbia;

 

    an estate the income of which is subject to U.S. federal income taxation regardless of its source; or

 

    a trust that (i) is subject to the primary supervision of a court within the United States and the control of one or more United States persons or (ii) has a valid election in effect under applicable Treasury regulations to be treated as a United States person.

Holders of CalAtlantic common stock who are not U.S. holders as defined above may have different tax consequences than those described below and are urged to consult their own tax advisors about the tax treatment to them under U.S. and non-U.S. tax laws.

This discussion applies only to U.S. holders of CalAtlantic common stock who hold shares of such stock as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all of the U.S. federal income tax consequences that may be relevant to U.S. holders of CalAtlantic common stock in light of their particular circumstances or to U.S. holders who may be subject to special treatment under U.S. federal income tax laws, such as tax exempt organizations, S corporations, financial institutions, insurance companies, broker-dealers, regulated investment companies, real estate investment trusts, U.S. expatriates, persons who hold CalAtlantic shares as part of a hedge, straddle, wash sale, synthetic security, conversion transaction, or other integrated investment comprised of CalAtlantic shares and one or more investments, persons whose “functional currency” (as defined in the Code) is not the U.S. dollar, and persons who acquired CalAtlantic shares in compensatory transactions. Further, this discussion does not address any aspect of state, local, or foreign taxation.

If a partnership (or other entity classified as a partnership or pass-through entity for U.S. federal tax purposes) is a beneficial owner of CalAtlantic shares, the tax treatment of a partner in that partnership will generally depend on the status of the partner and the activities of the partnership. CalAtlantic stockholders that are partnerships and partners in these partnerships are urged to consult their tax advisors regarding the U.S. federal income tax consequences of the Merger to them.

This discussion is based on the Code, Treasury regulations promulgated thereunder, court decisions, published rulings of the IRS and other applicable authorities, all as in effect on the date of this joint proxy statement/prospectus and all of which are subject to change or differing interpretations, possibly with retroactive effect.

THIS SUMMARY IS NOT A SUBSTITUTE FOR AN INDIVIDUAL ANALYSIS OF THE TAX CONSEQUENCES OF THE MERGER TO YOU. WE URGE YOU TO CONSULT YOUR TAX ADVISOR REGARDING THE PARTICULAR FEDERAL, STATE, LOCAL, AND FOREIGN TAX CONSEQUENCES OF THE MERGER AND THE OWNERSHIP AND DISPOSITION OF SHARES OF LENNAR COMMON STOCK RECEIVED IN THE MERGER IN LIGHT OF YOUR OWN SITUATION .

 

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Tax Opinion

Lennar and CalAtlantic intend that the Merger will constitute a “reorganization” within the meaning of section 368(a) of the Code. In connection with the filing of the registration statement of which this proxy statement/prospectus is a part, CalAtlantic’s tax counsel, Gibson Dunn has rendered its tax opinion to CalAtlantic. It is the opinion of Gibson Dunn that, subject to the qualifications and assumptions described below, the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code and the material U.S. federal income tax consequences of the Merger will be as described below. In addition, the obligation of CalAtlantic to complete the Merger is conditioned on, among other matters, CalAtlantic’s receipt of an opinion from Gibson Dunn, dated as of the closing date of the Merger, that for U.S. federal income tax purposes the Merger will be treated as a reorganization within the meaning of Section 368(a) of the Code. The conditions relating to receipt of such closing tax opinion may be waived by CalAtlantic. CalAtlantic does not currently intend to waive the condition related to its receipt of the closing tax opinion.

The opinion of Gibson Dunn, counsel to CalAtlantic, referred to above is based on U.S. federal income tax law in effect as of the date of the opinion. In rendering the opinion, Gibson Dunn relied on certain assumptions, including assumptions regarding the absence of changes in existing facts and the completion of the Merger strictly in accordance with the merger agreement and the registration statement of which this joint proxy statement/prospectus is a part. The opinion also relied on certain representations and covenants of the management of Lennar and CalAtlantic, assumed that the representations are true, correct, and complete and assumed that the covenants will be complied with. If any of the assumptions or representations are inaccurate, or if any of the covenants are not complied with, the conclusions set forth in the opinion may be invalid. The opinion is not binding on the IRS or any court. In addition, no ruling from the IRS has been or will be requested regarding the U.S. federal income tax consequences of the Merger. Accordingly, the IRS could disagree with or challenge any of the conclusions set forth in the opinion, and any such disagreement or challenge could be sustained by a court.

Based on the Gibson Dunn opinion, the following tax consequences will follow from the Merger:

Tax Consequences of the Merger to CalAtlantic Stockholders

The Merger

The Merger will qualify as a “reorganization” within the meaning of section 368(a) of the Code; accordingly, the United States federal income tax consequences of the Merger to a U.S. holder of CalAtlantic common stock will depend on whether a holder exchanges its CalAtlantic common stock in any part for cash.

Exchange Solely for Lennar Common Stock

If, pursuant to the Merger, a U.S. holder of CalAtlantic common stock exchanges such shares solely for Lennar common shares, such holder will not recognize any gain or loss on such exchange except in respect of cash received in lieu of a fractional share of Lennar common stock (as discussed below). The aggregate adjusted tax basis of the Lennar common shares received in the Merger (including fractional shares received and redeemed as described below) will be equal to the aggregate adjusted tax basis of the shares of CalAtlantic common stock surrendered for the Lennar common shares, and the holding period of the Lennar common shares (including fractional shares deemed received and redeemed as described below) will include the period during which the CalAtlantic common stock was held.

Exchange for Cash or Exchange for Lennar Common Stock and Cash

If, pursuant to the Merger, a U.S. holder of CalAtlantic common stock exchanges its CalAtlantic common stock for cash and shares of Lennar common stock, then such holder generally will recognize gain (but not loss) in an amount equal to the lesser of:

 

    any gain realized with respect to such stock; or

 

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    the amount of any cash received with respect to such stock (other than any cash received instead of a fractional share of Lennar common stock). A holder’s gain realized will equal the difference between the fair market value of the Lennar common stock and cash received and such holder’s tax basis in the CalAtlantic common stock surrendered.

If, pursuant to the Merger, a U.S. holder of CalAtlantic common stock exchanges its CalAtlantic common stock solely for cash, then such holder generally will recognize gain or loss in an amount equal to the difference between the cash received and such holder’s tax basis in the CalAtlantic common stock surrendered.

For these purposes, a U.S. holder of CalAtlantic common stock must calculate gain (or, to the extent relevant, loss) separately for each identifiable block (that is, stock acquired at the same time for the same price) of CalAtlantic common stock exchanged in the Merger. Except to the extent that any cash received is treated as a dividend as discussed below, a holder’s recognized gain (or loss) generally will be capital gain (or loss) and will be long-term capital gain (or loss) if the holder held the exchanged CalAtlantic common stock for more than one year. The deductibility of capital losses is subject to limitations.

If the receipt of cash in the Merger by a U.S. holder of CalAtlantic common stock has the effect of a distribution of a dividend, the cash received will be treated as dividend income to the extent of the stockholder’s ratable share of CalAtlantic’s accumulated earnings and profits (as calculated for U.S. federal income tax purposes). In general, the determination as to whether the receipt of cash has the effect of a distribution of a dividend depends upon whether and to what extent the transactions related to the Merger will be deemed to reduce the holder’s percentage ownership of Lennar following the Merger. For purposes of that determination, a U.S. holder of CalAtlantic common stock will be treated as if the stockholder first exchanged all of the stockholder’s CalAtlantic shares solely for Lennar shares, and then a portion of the Lennar shares was immediately redeemed by Lennar for the cash that the stockholder actually received in the Merger. Gain recognized in the deemed redemption generally will be treated as a dividend to the extent of the stockholder’s ratable share of the undistributed accumulated earnings and profits of CalAtlantic, unless the deemed redemption results in a “meaningful reduction” in the stockholder’s deemed stock ownership of Lennar.

In making this determination of whether there is a “meaningful reduction” in the U.S. holder’s deemed ownership of Lennar, the U.S. holder will, under certain constructive ownership rules contained in the Code, be deemed to own not only the Lennar shares actually owned, but also Lennar shares that are owned by certain related persons and entities or that the stockholder or such persons or entities have the right to acquire pursuant to an option. The IRS has ruled that a stockholder in a publicly held corporation whose relative stock interest is minimal and who exercises no control with respect to corporate affairs generally is considered to have a “meaningful reduction” if that stockholder has any reduction in the stockholder’s percentage stock ownership under the above analysis. These rules are complex and dependent upon the specific factual circumstances particular to each U.S. holder of CalAtlantic common stock. Each U.S. holder of CalAtlantic common stock should consult his, her, or its tax advisor as to the application of these rules to the stockholder’s particular situation.

A U.S. holder of CalAtlantic common stock will have an aggregate tax basis in the Lennar shares received in the Merger (including any fractional shares of Lennar common stock deemed received by the CalAtlantic stockholder) equal to the stockholder’s aggregate adjusted tax basis in the CalAtlantic shares surrendered in the Merger:

 

    reduced by the amount of cash received in the Merger by the stockholder for those CalAtlantic shares (excluding any cash received in lieu of a fractional share of Lennar common stock); and

 

    increased by the amount of gain (including the portion of this gain that is treated as a dividend as described above) recognized by the stockholder in the Merger (excluding any gain recognized as a result of cash received in lieu of a fractional share of Lennar common stock).

The holding period in the Lennar shares received in the Merger by a U.S. holder of CalAtlantic common stock will include the stockholder’s holding period in the CalAtlantic shares surrendered in exchange for those Lennar shares, if those CalAtlantic shares are held as capital assets as of the effective time of the Merger.

 

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U.S. holders of CalAtlantic common stock who hold CalAtlantic shares with differing bases or holding periods should consult their tax advisors with regard to identifying the bases or holding periods of the particular Lennar shares received in the Merger.

Certain non-corporate U.S. holders of CalAtlantic common stock whose income exceeds certain thresholds may also be subject to a 3.8 % tax on their “net investment income” up to the amount of such excess. Gain or loss recognized in the Merger will be includable in the holder’s net investment income for purposes of this tax. Non-corporate U.S. holders of CalAtlantic common stock should consult their own tax advisors regarding the possible effect of this tax.

Cash Received in Lieu of Fractional Shares

Cash payments received by a U.S. holder of CalAtlantic common stock in lieu of fractional shares of Lennar common stock will be treated as if such Lennar shares were issued in the Merger and then redeemed by Lennar. In that event, subject to the discussion above regarding possible dividend treatment, the stockholder generally will recognize capital gain or loss equal to the difference between the cash received in lieu of those fractional shares and the portion of the stockholder’s adjusted tax basis in the CalAtlantic common stock surrendered that is allocable to those fractional shares. The capital gain or loss will be long-term capital gain or loss if the holding period for the CalAtlantic share or shares exchanged for cash in lieu of the fractional share or shares of Lennar common stock is more than one year as of the date of the Merger. The deductibility of capital losses is subject to limitations.

Information Reporting and Backup Withholding

Cash payments received in the Merger by a U.S. holder of CalAtlantic common stock may, under certain circumstances, be subject to information reporting and backup withholding on the cash payable to the holder, unless the stockholder provides proof of an applicable exemption or furnishes its taxpayer identification number (in the case of individuals, their social security numbers), and otherwise complies with all applicable requirements of the backup withholding rules. Any amounts withheld from payments to a U.S. holder under the backup withholding rules do not represent additional tax and will be allowed as a refund or credit against the U.S. holder’s U.S. federal income tax liability, provided the required information is timely furnished to the IRS.

Reporting Requirements

If a U.S. holder of CalAtlantic common stock who receives Lennar shares in the Merger is considered a “significant holder,” such stockholder will be required (i) to file a statement with the stockholder’s U.S. federal income tax return providing certain facts pertinent to the Merger, including the tax basis in the CalAtlantic shares surrendered and the fair market value of the Lennar shares received in the Merger, and (ii) to retain permanent records of these facts relating to the Merger. A “significant holder” for this purpose is any U.S. holder of CalAtlantic common stock who, immediately before the Merger, (i) owns at least 5% (by vote or value) of CalAtlantic common stock or (ii) owns CalAtlantic securities with a tax basis of $1 million or more.

The foregoing discussion is for general information only and is not intended to be legal or tax advice to any particular U.S. holder of CalAtlantic common stock. Tax matters regarding the Merger are very complicated, and the tax consequences of the Merger to any particular U.S. holder of CalAtlantic common stock will depend on that stockholder’s particular situation. All holders of CalAtlantic common stock should consult their own tax advisors to determine the specific tax consequences of the Merger, including tax return reporting requirements, the applicability of U.S. federal, state, local, and foreign tax laws, and the effect of any proposed change in the tax laws to them.

 

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THE MERGER AGREEMENT

This section of this joint proxy statement/prospectus describes the material provisions of the merger agreement, but does not describe all of the terms of the merger agreement and may not contain all of the information about the merger agreement that is important to you. The following summary is qualified by reference to the complete text of the merger agreement, which is attached as Annex A to this joint proxy statement/prospectus and incorporated by reference herein. You are urged to read the full text of the merger agreement because it is the legal document that governs the Merger.

The merger agreement and this summary of its terms have been included to provide you with information regarding the terms of the merger agreement. Factual disclosures about Lennar, CalAtlantic or any of their respective subsidiaries or affiliates contained in this joint proxy statement/prospectus or their respective public reports filed with the SEC may supplement, update or modify the factual disclosures contained in the merger agreement and described in this summary. The representations, warranties and covenants contained in the merger agreement were made only for purposes of the merger agreement, as of a specific date. These representations were made solely for the benefit of the parties to the merger agreement and may be subject to important qualifications and limitations agreed upon or understood by the contracting parties, including being qualified by confidential disclosures made for the purpose of allocating risk between parties to the merger agreement rather than the purpose of establishing these matters as facts, and may apply standards of materiality in ways that are different from those generally applicable to reports filed with the SEC or from what may be viewed as material by investors. The representations and warranties in the merger agreement do not survive completion of the Merger. For the foregoing reasons, one should not read the representations and warranties or any description thereof as characterizations of the actual state of facts or condition of CalAtlantic or Lennar.

Terms of the Merger

The merger agreement provides that, upon the terms and subject to the conditions of the merger agreement, and in accordance with the Delaware General Corporation Law, (i) at the effective time of the Merger, CalAtlantic will merge with and into Merger Sub, the separate existence of CalAtlantic will terminate, and Merger Sub will continue as the corporation surviving the Merger and a wholly-owned subsidiary of Lennar. At the effective time of the Merger, each share of CalAtlantic common stock issued and outstanding immediately prior to the effective time of the Merger (other than shares of CalAtlantic common stock held in the treasury of CalAtlantic or held by any direct or indirect wholly-owned subsidiary of CalAtlantic, and shares of CalAtlantic common stock held by Lennar or Merger Sub, immediately prior to the effective time of the Merger) will be automatically converted into and become the right to receive either 0.885 shares of Lennar Class A common stock and 0.0177 shares of Lennar Class B common stock by virtue of the Merger and without any action by the holder, and cash in lieu of fractional shares of Lennar common stock. However, a holder of CalAtlantic common stock will have the option to elect to receive, with regard to some or all of the holder’s shares, $48.26 per share in cash instead of receiving Lennar stock. The aggregate amount that Lennar will pay to all CalAtlantic stockholders as a result of cash elections will be limited to $1,162,250,000. To the extent exercises of the cash election option would require Lennar to pay more than that amount in the Merger, holders who exercise the cash election option will receive cash for a prorated portion of the shares as to which they exercised the cash option and will receive Lennar Class A and Class B common stock with respect to the remainder of those shares. Lennar will not issue fractional shares of common stock in the Merger. Instead, all fractional shares of Lennar common stock that a single holder of CalAtlantic common stock would be entitled to receive shall be aggregated, and any holder of CalAtlantic common stock who would be entitled to receive a fractional share will receive cash equal to the market value of a share of the applicable class of Lennar common stock multiplied by that fraction. The market value will be the last sale price reported on the NYSE on the last NYSE trading day before the effective date of the Merger.

 

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Exchange and Payment Procedures

Promptly after the effective time of the Merger (but in no event later than two business days after the date on which the effective time occurs), if you are a CalAtlantic stockholder and are the record holder of CalAtlantic common stock at the effective time of the Merger who did not make a cash election, Lennar’s distribution agent will mail or arrange for the electronic delivery of a letter of transmittal and instructions to you for use in effecting the surrender of your CalAtlantic common stock (including any stock certificates if you hold shares in certificated form) in exchange for Lennar stock. When you surrender the certificates for cancellation together with letters of transmittal and any other documents (including in respect of book-entry shares), you will be entitled to receive the merger consideration, including cash payable in lieu of any fractional shares of Lennar common stock.

UNLESS YOU ARE EXERCISING THE CASH ELECTION OPTION (DISCUSSED BELOW), PLEASE DO NOT SUBMIT YOUR CALATLANTIC STOCK CERTIFICATES IN ORDER TO RECEIVE THE MERGER CONSIDERATION UNTIL YOU RECEIVE THE TRANSMITTAL INSTRUCTIONS AND LETTER OF TRANSMITTAL FROM THE DISTRIBUTION AGENT.

At the effective time of the Merger, your CalAtlantic shares will automatically be converted into the right to receive Lennar Class A and Class B common stock. However, the Lennar stock will not be issued to you until the distribution agent designated by Merger Sub receives either (i) the certificate representing your CalAtlantic shares together with an executed letter of transmittal (in a form that will be mailed to record holders within two business days after the day on which the Merger becomes effective) and any documents required by it, or (ii) an Agent’s Notice from The Depositary Trust Company stating that your shares have been transferred by book entry into an account established by the distribution agent for the purpose of receiving CalAtlantic common stock. If the distribution agent or Lennar determines that the distribution agent is required under any applicable tax law to withhold merger consideration issuable to any person, the distribution agent will make the required withholding.

If your CalAtlantic shares are represented by a stock certificate registered in your name and that stock certificate has been lost, stolen or destroyed, you will have to provide an affidavit to that fact and, if required by Lennar, post an indemnity against any claim that may be made against it in respect of the stock certificate, in order for you to receive your merger consideration from the distribution agent with regard to your lost, stolen or destroyed stock certificate.

At any time after more than six months following the effective time of the Merger, Lennar may require the distribution agent to return to Lennar any merger consideration which was provided to the distribution agent but not disbursed to former CalAtlantic stockholders, in which case you must look to Lennar to receive the merger consideration.

Treatment of Preferred Share Purchase Rights; Convertible Debt

Preferred Share Purchase Rights . At the effective time of the Merger, the preferred share purchase rights issued under the Amended and Restated Rights Agreement, dated as of December 20, 2011, between CalAtlantic and Mellon Investor Services LLC, as amended, if it still remains in effect, will be cancelled and will cease to exist, and no additional merger consideration or any other consideration will be issued or paid with regard to these preferred share rights. Such Amended and Restated Rights Agreement currently expires pursuant to its terms on December 31, 2017, after which time no preferred share repurchase rights will be outstanding.

Convertible Debt . The merger agreement provides that at the effective time of the Merger, all outstanding convertible debt of CalAtlantic which, by its terms, is convertible into CalAtlantic common stock, will remain outstanding and unaffected by the Merger, except that the holder of such debt will receive, on conversion of the convertible debt, the number of shares of Lennar Class A common stock equal to (a) the number of shares of CalAtlantic common stock the holder would have received if the Merger had not taken place multiplied by

 

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(b) 0.885, plus the number of shares of Lennar Class B common stock equal to (x) the number of shares of CalAtlantic common stock the holder would have received if the Merger had not taken place multiplied by (y) 0.0177; unless the indenture relating to a particular issue of convertible debt provides otherwise, in which case the holder of convertible debt of that issue will receive what is provided in the indenture.

The Supplemental Indenture relating to each of the currently outstanding issues of CalAtlantic convertible notes provides that if Notes are converted after a merger, holders of the Notes will be entitled to receive upon conversion what they would have received in the merger if they had converted their Notes immediately before the merger. Each of the Supplemental Indentures goes on to say that in the case of a merger or other transaction in which holders of common stock can elect more than one type of consideration, what the holders of common stock receive, and therefore what the holders of Notes will receive on conversion, “will be deemed to be the weighted average of the types and amounts of consideration received by the holders of Common Stock that affirmatively make such election.” Because the only CalAtlantic stockholders who make an affirmative election will be CalAtlantic stockholders who elect to receive cash, the Supplemental Indenture provision would result in holders of notes that are converted after the effective time of the Merger receiving the same consideration per CalAtlantic share that is received by holders of CalAtlantic stock who elect to receive cash. Unless holders of more than 24,083,091 shares elect to receive cash, holders who elect to receive cash will receive 100% of their merger consideration in the form of cash of $48.26 per CalAtlantic share. Even if holders of more than 24,083,091 shares elect to receive cash, and therefore the cash they receive will be prorated, it is likely they will receive a substantial portion of their merger consideration in the form of cash.

Based on the CalAtlantic stock that was outstanding on January 4, 2018, all the CalAtlantic stockholders together will receive a total of approximately 79.27% Lennar stock (at the rate of 0.885 shares of Lennar Class A common stock and 0.0177 shares of Lennar Class B common stock per full CalAtlantic share) and 20.73% cash (at $48.26 per full CalAtlantic share). Based on the trading prices of Lennar’s Class A and Class B common stock on the last NYSE trading day before the date of this joint proxy Statement/prospectus, the value of 79.27% Lennar stock and 20.73% cash will substantially exceed $48.26 per CalAtlantic share. In order to enable holders of CalAtlantic convertible debt (and, in particular, holders of its 0.25% Convertible Senior Notes due 2019) to avoid receiving entirely or primarily cash on conversion after the Merger takes place, Lennar intends to offer holders of CalAtlantic convertible debt for a limited period of time after the Merger takes place the option of electing to receive on conversion the same combination of Lennar Class A and B common stock and cash that is received in total by the holders of CalAtlantic common stock.

Treatment of Equity Awards

Options . At the effective time of the Merger, each outstanding option to purchase shares of CalAtlantic common stock will automatically convert into an option to acquire the number of shares of Lennar Class A common stock equal to (i) the number of shares of CalAtlantic common stock to which the option related immediately prior to the effective time multiplied by (ii) 0.885 (rounded down, if necessary, to the nearest whole share of Lennar Class A common stock), plus one share of Lennar Class B common stock for each 50 shares of Class A common stock, on the same terms and conditions as were applicable under such CalAtlantic option immediately prior to the consummation of the Merger. The exercise price of each outstanding option will be based on the exercise price of the CalAtlantic option per share of CalAtlantic common stock as of immediately prior to the effective time of the Merger, the exchange ratio of 0.885 shares of Lennar Class A common stock for each share of CalAtlantic common stock and equitable and proportionate adjustments taking into account the Class B dividend. after the effective time of the Merger, Lennar will file a registration statement under the Securities Act on Form S-8 (or any successor or other appropriate forms), with respect to the shares of Lennar common stock subject to such options, and will use its commercially reasonable efforts to maintain the effectiveness of such registration statement for so long as such options remain outstanding.

Restricted Stock Units and Performance Share Units . At the effective time of the Merger, each time-based or performance-based RSU award granted under any of the CalAtlantic equity plans that is outstanding immediately prior to the effective time of the Merger will be converted into a right to receive shares of Lennar

 

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Class A and Class B common stock, on the same terms and conditions (including any vesting or forfeiture provisions or repurchase rights, but taking into account any acceleration or other deemed satisfaction thereof pursuant to the existing terms of the relevant CalAtlantic equity plans or applicable award agreement by reason of the transactions contemplated hereby) as are applicable immediately prior to the consummation of the Merger. The number of shares subject to the RSU will be equal to (i) the number of shares of CalAtlantic common stock subject to the restricted stock immediately prior to the effective time of the Merger multiplied by (ii) 0.885 (rounded down, if necessary, to the nearest whole share of Lennar Class A common stock), plus one share of Lennar Class B common stock for each 50 shares of Class A common stock. All performance-based vesting criteria to which any outstanding CalAtlantic RSUs are subject for which the performance period is not completed as of the effective time of the Merger will be deemed achieved at the target performance level. As soon as practicable after the effective time of the Merger, Lennar will file a registration statement under the Securities Act on Form S-8 (or any successor or other appropriate forms), with respect to the shares of Lennar common stock subject to such RSUs and PSUs, and will use its commercially reasonable efforts to maintain the effectiveness of such registration statement for so long as any such RSUs or PSUs remain outstanding.

Stock Appreciation Rights . At the effective time of the Merger, each SAR based on shares of CalAtlantic common stock that is outstanding immediately prior to the effective time will automatically convert into a right based on the shares of Lennar common stock, on the same terms and conditions (including any vesting or forfeiture provisions or repurchase rights, but taking into account any acceleration thereof pursuant to the existing terms of the relevant CalAtlantic equity plans or applicable award agreement by reason of the transactions contemplated hereby) as are applicable immediately prior to the effective time of the Merger. Each SAR will convert into (i) the number of shares of CalAtlantic common stock to which the SAR related immediately prior to the effective time multiplied by (ii) 0.885 (rounded down, if necessary, to the nearest whole share of Lennar Class A common stock), plus one share of Lennar Class B common stock for each 50 shares of Class A common stock. The exercise price of each outstanding SAR will be based on the exercise price of the CalAtlantic option per share of CalAtlantic common stock as of immediately prior to the effective time of the Merger, the exchange ratio of 0.885 shares of Lennar Class A common stock and equitable and proportionate adjustments taking into account the Class B dividend. If the holders of SARs are entitled to receive shares of Lennar Class A common stock on exercise of the SARs, as soon as practicable after the effective time of the Merger, Lennar will file a registration statement under the Securities Act on Form S-8 (or any successor or other appropriate forms) with respect to the shares of Lennar common stock subject to such SARs, and will use its commercially reasonable efforts to maintain the effectiveness of such registration statement for so long as any such SARs remain outstanding.

Adjustments; Dividends

If between October 29, 2017 and the effective time of the Merger, the outstanding shares of CalAtlantic common stock or any or all classes of Lennar stock are changed into a different number of shares or a different type of securities (by reason of a reclassification, recapitalization, split, combination, exchange of shares, conversion or similar event), the exchange ratio will be adjusted so that the Merger will have the same economic effect on the holders of CalAtlantic common stock as that contemplated by the merger agreement, as if there had been no such event. Except for the previously declared Lennar Class B common stock dividend described below, if any dividend payable in stock or other securities is declared with regard to the CalAtlantic common stock or the Lennar stock with a record date between October 29, 2017 and the effective time of the Merger, the exchange ratio will be adjusted so that the Merger will have the same economic effect on the holders of CalAtlantic common stock as that contemplated by the merger agreement, as if there had been no such dividend. If Lennar issues shares of its Class B common stock as a dividend with regard to the Lennar stock, that is payable to holders of record thereof on a date between October 29, 2017 and the effective time of the Merger, the merger consideration will include, in addition to the Lennar Class A common stock described above in “Terms of the Merger,” the number of shares of Lennar Class B common stock that would have been issued as a dividend on the Lennar Class A common stock to be paid as merger consideration if it had been outstanding on the record date for the dividend, and each reference to the exchange ratio in the merger agreement will be deemed to include

 

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the shares of Lennar Class B common stock that are issuable, except where such deemed substitution would not be practical, such as in adjustments to the exercise price of CalAtlantic options, in which case there will be another equitable and proportionate adjustment in such exercise price to take into account the Class B dividend. On October 29, 2017, Lennar declared a stock dividend of one share of Class B common stock for each 50 shares of its Class A common stock or Class B common stock outstanding, payable on November 27, 2017 to holders of record at the close of business on November 10, 2017. Because of that, the merger consideration will include one share of Class B common stock for each 50 shares of Class A common stock included in the merger consideration (equal to 0.0177 shares of Class B common stock per share of CalAtlantic common stock based on the exchange ratio of 0.885 shares of Lennar common stock for each share of CalAtlantic common stock).

Cash Election

Each person who is a record holder of CalAtlantic common stock at any time between the date of this joint proxy statement/prospectus and the Election Deadline (defined below), will have the option to elect to receive $48.26 in cash, without interest, per share of CalAtlantic common stock, in lieu of receiving Lennar common stock in the Merger, subject to possible proration as described below. The option to make a Cash Election will expire at 11:59 p.m. Eastern Time on the fifth business day before the day on which the CalAtlantic stockholder meeting is scheduled to be held, which we refer to as the “Election Deadline.” Lennar will cause the distribution agent to transmit a cash election form to each holder of record of CalAtlantic common stock, which will enable a record holder to specify the number of shares of CalAtlantic common stock, if any, as to which the record holder elects to exercise the cash election option. In order to properly exercise the cash election option, a record holder of CalAtlantic common stock must timely return a completed and signed cash election form, together with the stock certificate evidencing the shares of CalAtlantic common stock as to which the cash election option is being exercised or an Agent’s Notice stating that such shares of common stock have been transferred by book entry transfer to an account established by the distribution agent. A holder of shares of CalAtlantic common stock will have the right to change or withdraw a cash election at any time before the Election Deadline, but not after the Election Deadline, in accordance with procedures set forth in the instructions to the cash election form. If the merger agreement is terminated without the Merger taking place, all cash elections will automatically be deemed revoked.

The aggregate amount Lennar will pay as a result of cash elections will be limited to $1,162,250,000. If the total amount of cash consideration Lennar would be required to pay would exceed $1,162,250,000, each holder of CalAtlantic common stock who makes a valid cash election that is not withdrawn will receive $48.26 for a prorated number of the shares as to which a cash election is made and will receive Lennar Class A and Class B common stock for the remaining shares of CalAtlantic common stock. Not more than two business days after the day on which the effective time of the Merger occurs, Lennar will deliver $1,162,250,000 in cash to the distribution agent.

Any holder of CalAtlantic stock who does not properly exercise the cash election option will receive Lennar common stock in the Merger.

Financing Related to the Merger

Although the Merger is not conditioned upon Lennar having received any financing, in anticipation of the cash payments Lennar may make to CalAtlantic stockholders in connection with Merger, Lennar sold $1.2 billion of senior notes in a private offering that closed on November 29, 2017. Lennar intends to use the net proceeds from that senior notes offering primarily to fund the cash consideration payable to CalAtlantic stockholders who elect to receive cash in the Merger, to pay expenses related to the Merger and for general corporate purposes.

Governance Matters

Unless otherwise agreed by the parties before the Merger is completed, Scott D. Stowell will be elected to the Lennar board of directors as of immediately after the Merger becomes effective. If Mr. Stowell is unable or unwilling to serve as a director of Lennar, the CalAtlantic board of directors may select another individual to

 

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serve on the Lennar board of directors, such person to be reasonably acceptable to Lennar’s Nominating and Corporate Governance Committee.

Lennar did not prior to the time when the merger agreement was signed discuss with any director or officer of CalAtlantic the possibility of that person’s being employed by CalAtlantic or Lennar after the Merger. Since the merger agreement was signed, Lennar has discussed with some current officers of CalAtlantic possible roles they might play as employees of CalAtlantic or Lennar after the Merger.

Completion of the Merger

Unless CalAtlantic and Lennar agree otherwise, the closing of the Merger will take place at 9:00 a.m., Eastern time, on the first business day after the later of the day on which the necessary approvals of CalAtlantic or Lennar stockholders are obtained, subject to the satisfaction or waiver of the closing conditions described under “—Conditions to Completion of the Merger” below, and the date on which all closing conditions to completion of the Merger are satisfied or waived (in each case, other than those conditions that by their nature are to be satisfied at closing). The Merger will become effective at 11:59 p.m. Eastern time on the day on which a certificate of merger is filed with the Secretary of State of Delaware or at such other time as the CalAtlantic and Lennar may specify in the certificate.

Conditions to Completion of the Merger

Each party’s obligation to consummate the Merger is conditioned upon the satisfaction (or waiver by such party) at or prior to the closing of the Merger of each of the following:

 

    approval of the Lennar Merger Proposal by the affirmative vote of the holders of a majority in voting power of the shares of Lennar Class A common stock and Class B common stock that are voted with regard to it, voting together as though they were a single class;

 

    if approval of the Authorized Share Proposal is necessary to enable Lennar to issue all the shares of Class A common stock it will be required to issue as a result of the Merger (which it probably will not be), approval of the Authorized Share Proposal by the affirmative vote of both the holders of a majority in voting power of the outstanding shares of Lennar Class A common stock and Class B common stock, voting together as though they were a single class, and the affirmative vote of the holders of a majority of the shares of Lennar Class A common stock that are voted with regard to the proposal;

 

    (i) the representations and warranties of the other party with respect to organization, authorization, capitalization and absence of undisclosed brokers’ fees in connection with the transaction must be true and correct in all material respects on the date of closing of the Merger with the same effect as though made on the closing date, and (ii) all other representations and warranties of the other party (without giving effect to any “materiality” or “material adverse effect” qualifications in those representations and warranties) must be true and correct in all respects on the closing date of the Merger, as though made on the closing date, except where the failure of such representations and warranties to be true and correct, in the aggregate, have not had and would not reasonably be expected to have a material adverse effect on such party;

 

    absence of any law, order, judgment, injunction or any other restrict or prohibition by any governmental entity prohibiting consummation of the Merger or invalidating the merger agreement;

 

    fulfillment, in all material respects, of all obligations of the other party required to be fulfilled by such other party on or before the closing date;

 

    effectiveness of the registration statement of which this joint proxy statement/prospectus is a part under the Securities Act and no stop order suspending the effectiveness of the registration statement having been issued and no proceedings for that purpose having been initiated or threatened in writing by the SEC; and

 

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    authorization and approval of the shares of Lennar stock deliverable to CalAtlantic stockholders for listing on the NYSE.

In addition, CalAtlantic’s obligation to consummate the Merger is conditioned upon the satisfaction (or waiver by CalAtlantic) at or prior to the closing of the Merger of each of the following additional conditions:

 

    approval of the CalAtlantic Merger Proposal by vote of the holders of a majority of outstanding shares of CalAtlantic common stock;

 

    filing and effectiveness of the amendment to the Lennar certificate of incorporation increasing the number of shares of Class A common stock it is authorized to issue; and

 

    receipt of a legal opinion of CalAtlantic’s counsel, to the effect that the Merger will constitute a “reorganization” within the meaning of Section 368(a) of the Code.

Representations and Warranties

Each of Lennar and Merger Sub, on the one hand, and CalAtlantic, on the other hand, has made customary representations and warranties with respect to itself and its subsidiaries, subject to certain exceptions in the merger agreement and each party’s disclosure letter that accompanied the merger agreement, regarding, among other things:

 

    organization, valid existence, and good standing;

 

    corporate power and authority necessary to enable it to enter into and perform the transactions contemplated by the merger agreement (other than, in the case of CalAtlantic (i) obtaining stockholder approval of the Merger and (ii) filing the necessary Merger documentation, and, in the case of Lennar (i) obtaining stockholder approval of the issuance of Class A common stock in the Merger, (ii) the filing of the certificate of amendment to increase the number of authorized shares of Lennar Class A common stock and (iii) filing the necessary Merger documentation);

 

    enforceability of the merger agreement (subject to the enforceability exceptions contained in the merger agreement) and approval of the merger agreement by each party’s board of directors;

 

    absence of conflicts with or defaults under organizational documents, any agreement or instrument to which such party or any subsidiary of such party is a party or by which any of them is bound, any law, or any order, rule or regulation of any court or other governmental agency or any other regulatory or quasi-regulatory organization having jurisdiction over such party or any of its subsidiaries, except violations, breaches or defaults that, individually or in aggregate, have not had and would not reasonably be expected to have a material adverse effect upon such a party;

 

    no consents or approvals necessary, other than the termination or expiration of waiting periods under the HSR Act, if any;

 

    capitalization;

 

    SEC filings since January 1, 2014, including financial statements contained in the filings;

 

    establishment and maintenance of internal controls and procedures;

 

    absence of undisclosed liabilities;

 

    conduct of the business and absence of certain changes since June 30, 2017, in the case of CalAtlantic, and August 31, 2017, in the case of Lennar, except as contemplated by the merger agreement, including that there has been no event, change, development, condition, or occurrence that has had or would reasonably be expected to have a material adverse effect on the party making the representation;

 

    compliance with applicable laws;

 

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    compliance with applicable building codes and similar codes, absence of certain vendor recalls and absence of recalls or recall notices from any product safety commissions, except as has not had and would not reasonably be expected to have a material adverse effect;

 

    equity interests in other entities;

 

    title to real properties;

 

    the absence of pending or threatened investigations or litigation;

 

    validity of permits;

 

    intellectual property and information technology matters;

 

    matters with respect to material contracts;

 

    certain labor and other employment matters, including benefit plans;

 

    tax matters;