Berkshire Hathaway Agrees to Acquire Taylor Morrison for Approximately $6.8 Billion

Berkshire Hathaway to Acquire Taylor Morrison Home Corp. in $6.8 Billion Deal

Berkshire Hathaway Inc. has agreed to acquire Taylor Morrison Home Corp. in an all-cash deal worth approximately $6.8 billion, marking the first major purchase under the leadership of Chief Executive Greg Abel. This significant acquisition is a testament to the company's confidence in the US housing market and represents a vote of confidence in the industry.

The offer of $72.50 per common share represents a 24% premium to Taylor Morrison's latest closing price on Friday. This deal is the largest since Berkshire bought Occidental Petroleum Corp.'s petrochemical business in January. Taylor Morrison's shares were up 22% to $71.64 at 10:00 a.m. in New York on Monday, while Berkshire's Class B shares were down 0.5%.

This acquisition is the first multibillion-dollar deal under Abel, who took over Berkshire Hathaway after legendary investor Warren Buffett retired last year. The deal comes during a period of underperformance for homebuilder stocks and as mortgage rates hit the highest since August. Berkshire Hathaway had a cash pile of $397 billion at the end of the first quarter, its highest level ever.

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The acquisition marks a notable departure from Berkshire's trademark strategy of letting acquisitions run independently, said Christopher Davis, a partner at Hudson Value Partners. "Investors will welcome that evolution in approach." Abel's comments about unifying Berkshire's homebuilding operations over time are a significant development, and investors are hoping that this deal will support Berkshire's shares, which have fallen 5.6% this year. In contrast, the S&P 500 index has gained 10.7% in the same period.

Taylor Morrison is one of the largest community developers and homebuilders in the US and also offers financial services like home loans, titles, escrow, and insurance to consumers. The Scottsdale, Arizona-based firm has more than 350 communities across 12 states. The existing Taylor Morrison management team, including Chief Executive Officer Sheryl Palmer, will continue to lead the company.

This deal is not Berkshire's first investment in the home-building business. The company also owns Clayton Homes and has shares in Lennar Corp. The deal comes at a time when homebuilding in the US has seen declines, with new residential construction decreasing 2.8% in April and single-family home starts declining 9%, the most since August.

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The deal is expected to close in the second half of this year. Taylor Morrison's Palmer stated that the company has built a track record of strategic growth over the last 13 years as a public company, expanding its geographic footprint, integrating acquisitions with discipline, and deepening its competitive strengths. Berkshire Hathaway's long-term orientation is uniquely well-suited to the multi-year investment cycle of homebuilding, she added.

Goldman Sachs Group Inc. and Moelis & Co. are serving as financial advisers, Simpson Thacher & Bartlett LLP is serving as legal adviser, and Mayer Brown LLP is serving as counsel to Taylor Morrison.