Acquisition Gives KB an Avenue Into Atlanta

KB Home Corp. said Monday that it has acquired Colony Homes -- the second-largest home builder in Atlanta -- for an undisclosed sum in a deal that will allow KB to tap into the nation’s largest new-home market.

Privately owned Colony generated revenue of $244 million last year and built 1,872 homes, mostly in the Atlanta area, where building permits for nearly 50,000 homes were issued last year.

The company also owns about 8,000 building lots.

Executives with Westwood-based KB, which built more than 25,000 homes and posted more than $5 billion in revenue last year, said the Colony acquisition would not have a material effect on revenue or profit in the short term.

The purchase reflects KB’s long-term effort to diversify its operations beyond its base in California and the Southwest. Last year, KB expanded its presence in the fast-growing Florida market by acquiring Orlando-based American Heritage Homes, as well as by establishing a new division in Tampa.

The home-building industry remains highly fragmented, with the nation’s 10 largest builders controlling only about 20% of the market, according to analysts. However, large, publicly traded builders such as KB have been driving industry consolidation by acquiring smaller, private builders in regional markets.

Kevin Tynan, an analyst at Argus Research, said the acquisitions give KB more leverage in negotiating deals with suppliers as well as landowners. “You just have synergies on all levels,” he said.

KB shares fell 98 cents Monday to $43.52 on the New York Stock Exchange.