Berkshire Hathaway Buying Builder Taylor Morrison for $6.8B

Berkshire Hathaway’s new leadership is making a bet on the housing market with the acquisition of a prominent homebuilding firm.

The Omaha-based investment company agreed to buy Arizona-based Taylor Morrison for $6.8 billion, Bloomberg reported. The deal sent shares of the homebuilder soaring by as much as 23 percent in premarket trading on Monday, reaching $71.75 per share.

The deal works out to $72.50 per common share of the homebuilder’s stock, a 24 percent premium on the stock’s closing price before the weekend.

In addition to developing communities across the country, Taylor Morrison also operates services such as home loans, titles, escrow and insurance. Its portfolio spans more than 350 complexes across a dozen states.

The deal’s significance goes beyond the acquisition of a major construction company — it also appears to signal a shift in approaches for Berkshire Hathaway under Greg Abel, who took over as chief executive after Warren Buffett’s retirement.

Abel said Berkshire inked the deal to “unify our site-built homebuilding operations into a combined platform.” Historically, acquisitions for Berkshire Hathaway continue to run independently.

That said, the management team for Taylor Morrison — including chief executive officer Sheryl Palmer — is expected to stay in place. They will likely be tasked with working in tandem with another homebuilder under the Berkshire Hathaway banner, Clayton Homes.

Berkshire Hathaway also owns shares in Lennar. Both Lennar and Taylor Morrison were involved in the proposed “Trump Homes” rent-to-own program for entry-level houses with an objective to construct up to 1 million homes, valued at $250 billion, utilizing funding from private investors.

“Berkshire Hathaway’s long-term orientation is uniquely well-suited to the multi-year investment cycle of homebuilding,” Palmer said in a statement.

The sale is expected to close in the second half of the year.

The bet on a homebuilder is a bet that construction activity will ramp up, despite headwinds facing the industry. New residential construction fell by 2.8 percent in April to an annualized rate of 1.47 million homes

Berkshire Hathaway stocks are down approximately 5.6 percent this year, a contrast to the 10.7 percent gain of the S&P 500 index.

— Holden Walter-Warner