Wednesday, Oct. 21, 1998 | 11:16 a.m.
Kaufman & Broad Home Corp. will merge with Lewis Homes to form the largest home building company in the United States and a behemoth in the Las Vegas market.
Based on current projections, the companies will have combined sales of more than 2,500 homes in Las Vegas and command a market share of between 15 and 20 percent.
Kaufman & Broad of Los Angeles agreed to pay $409 million in cash and stock, plus the assumption of about $135 million in debt for Upland, Calif.-based Lewis, the biggest privately held home builder in the country. For 1998, the combined revenues of the new company are expected to reach $3.8 billion on 18,500 homes delivered.
In a conference call on Tuesday, Kaufman & Broad Chairman and Chief Executive Officer Bruce Karatz said Lewis would continue to operate with its brand name in Nevada.
"Lewis Homes is an excellent strategic fit with our operations," Karatz said. "They have a similar operating strategy and their leading market shares in California and Nevada combined with Kaufman & Broad's strong presence in those areas will be a major boost to our market dominance strategies in those key markets."
The company hasn't determined management structure within the state or the relationship of Jay Moss, president of Kaufman & Broad of Nevada, and Robert Lewis, president of Lewis Homes of Nevada.
Also unresolved: whether employees with duplicate jobs in the two companies will be laid off after the merger is complete in January.
"It's not an issue to be worried over at this time," said K&B Chief Financial Officer Michael Henn. "We're not looking at this merger as a cost-saving move."
Instead, the two companies bring different strengths to the marriage. K&B, one of the largest entry-level home builders in the Las Vegas market, brings a dynamic marketing program to the merger and has specialized in offering homes with features local buyers haven't seen. The company is credited with bringing the front porch back to the tract home in Las Vegas.
Lewis has one of the largest inventories of land in the nation, including vast Las Vegas acreage. A quarterly report issued by The Meyers Group, an Irvine, Calif.-based housing research and consulting company, showed Lewis to have 35 neighborhoods in development in the Las Vegas Valley with homes with price tags ranging from $96,000 to $224,000.
K&B has 15 active subdivisions in the area including five in Summerlin and three in Henderson. Their prices range from $96,000 to $154,500.
Lewis has estimated 1998 revenues of $685 million on 3,500 home sales nationwide. The company has a backlog of about 1,200 homes and about 24,000 lots. Kaufman & Broad will have about $2.4 billion in sales on about 15,000 homes.
"It's a good fit," said David Thikoll, national sales director for The Meyers Group, which has been studying the Las Vegas market since 1990. "Lewis is very good at buying land on market-based opportunities. Kaufman & Broad is good at satisfying consumer demand through lots of choices. Customers can pick whatever kind of home they want."
Thikoll also believes the merger will be a positive move for consumers. The joined companies should be able to get good prices on materials and labor and pass that along to home buyers.
"The combined buying power and economies of scale should definitely help buyers and probably shareholders," Thikoll said.
Brad Burns, president of Real Homes, said Kaufman & Broad and Lewis will still work to dominate their respective niches.
"That won't necessarily keep the cost of a home down," Burns said. "Where it will help consumers is in quality issues.
"There may be an improvement in the quality of the homes. The real price issue will occur if the quarter-cent sales tax does not pass," he said in reference to a ballot advisory question on improvements to the city's water system.
Moss, K&B's top Nevada executive, said he likes the idea of linking with a company that has more than 20 years' experience in Las Vegas.
"The Lewis name will continue to thrive in Las Vegas while Kaufman & Broad is the premiere home builder in the entry-level first home or the first move-up," Moss said.
In announcing the merger, Karatz said the Lewis family and management team would continue to play key roles in the new operation.
Robert Lewis' brother Randall, executive vice president of the company and a son of founders Ralph and Goldy Lewis, said a member of his family would join Kaufman & Broad's board of directors.
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