S-4/A 1 d391974ds4a.htm AMENDMENT NO.2 TO FORM S-4 Amendment No.2 to Form S-4
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As filed with the Securities and Exchange Commission on June 21, 2017

Registration No. 333-217750

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Amendment No. 2

to

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

CENTURY COMMUNITIES, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

Delaware   1531   68-0521411

(State or Other Jurisdiction of

Incorporation or Organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

 

 

8390 East Crescent Parkway, Suite 650

Greenwood Village, Colorado 80111

(303) 770-8300

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

 

 

Dale Francescon

Chairman of the Board of Directors and Co-Chief Executive Officer

Century Communities, Inc.

8390 East Crescent Parkway, Suite 650

Greenwood Village, Colorado 80111

(303) 770-8300

(Address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

 

Clifford E. Neimeth, Esq.

Greenberg Traurig, LLP

MetLife Building

200 Park Avenue

New York, New York 10166

(212) 801-9200

 

Mark J. Kelson, Esq.

Greenberg Traurig, LLP

1840 Century Park East, Suite 1900

Los Angeles, California 90067

(310) 586-3856

 

Ross A. Fieldston, Esq.

Jeffrey D. Marell, Esq.

Paul, Weiss, Rifkind, Wharton & Garrison LLP

1285 Avenue of the Americas

New York, New York 10019

(212) 373-3105

 

 

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this Registration Statement is declared effective and upon the satisfaction or waiver of all other conditions to consummation of the merger described herein.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  ☐


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If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer   ☐  (Do not check if a smaller reporting company)    Smaller reporting company  
     Emerging growth company  

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☒

If applicable, please an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  ☐

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)  ☐

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the U.S. Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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The information in this proxy statement/prospectus is not complete and is subject to completion and amendment. A registration statement relating to the securities described in this proxy statement/prospectus has been filed with the U.S. Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted until the registration statement filed with the U.S. Securities and Exchange Commission is declared effective. This proxy statement/prospectus is not an offer to sell, nor a solicitation of an offer to buy these securities, in any jurisdiction where the offer, solicitation or sale is not permitted prior to registration under the securities laws of any such jurisdiction.

 

PRELIMINARY—SUBJECT TO COMPLETION—DATED JUNE 21, 2017

 

LOGO

MERGER PROPOSAL—YOUR VOTE IS VERY IMPORTANT

Dear Fellow Stockholders:

As previously announced on April 11, 2017, UCP, Inc. (“UCP”) entered into an Agreement and Plan of Merger, dated April 10, 2017 (as it may be amended from time to time, the “Merger Agreement”), with Century Communities, Inc. (“Century Communities”) and Casa Acquisition Corp. (“Merger Sub”), a wholly-owned subsidiary of Century Communities, pursuant to which UCP will be merged with and into Merger Sub (the “Merger”), with Merger Sub surviving as a wholly-owned subsidiary of Century Communities, and UCP no longer being a public company. If the Merger Agreement is adopted by UCP stockholders and the Merger is consummated, UCP stockholders will receive, in exchange for each share of UCP Class A Common Stock (as defined herein) owned by them immediately prior to the Merger, (i) 0.2309 of a share of Century Communities Common Stock (as defined herein) (the “stock consideration”) plus (ii) $5.32 in cash (the “cash consideration” and, together with the stock consideration, the “Merger Consideration”).

Based on Century Communities’ closing stock price on                , 2017, the most recent practicable date for which such information was available, the Merger Consideration represented approximately $         in value per share of UCP Class A Common Stock, which represents a premium of approximately     % over UCP’s closing stock price on April 10, 2017, the last trading day before the public announcement of the Merger Agreement. The value of the Merger Consideration will fluctuate based on the market price of Century Communities Common Stock until the completion of the Merger. Shares of Century Communities Common Stock and shares of UCP Class A Common Stock are traded on the New York Stock Exchange (the “NYSE”), under the ticker symbols “CCS” and “UCP,” respectively. We urge you to obtain current market quotations for the shares of Century Communities Common Stock and UCP Class A Common Stock.

Based on the number of shares of Century Communities Common Stock and UCP Class A Common Stock expected to be outstanding immediately prior to the closing of the Merger, Century Communities expects to issue approximately 4.2 million shares of Century Communities Common Stock (not including shares of Century Communities Common Stock issuable in connection with the assumed conversion of outstanding UCP stock options and restricted stock units into Century Communities stock options and restricted stock units in accordance with the terms set forth in the Merger Agreement). The issuance is expected to result in former UCP stockholders owning approximately 16.4%, and current Century Communities stockholders owning approximately 83.2%, of the outstanding Century Communities Common Stock immediately after the completion of the Merger.

The Merger cannot be consummated unless UCP stockholders holding a majority of the voting power of the outstanding shares of Class A Common Stock and Class B Common Stock (collectively, the “UCP Common Stock”), voting together as a single class, as of the close of business on                 , 2017 (the “Record Date”), vote in favor of the adoption of the Merger Agreement at the special meeting of UCP stockholders (the “UCP special meeting”) to be held on                , 2017, at                a.m., local time, at                . Your vote is very important regardless of the number of shares of UCP Common Stock you own. Whether or not you expect to attend the UCP special meeting in person, please vote or otherwise submit a proxy to vote your shares as promptly as possible so that your shares may be represented and voted at the UCP special meeting.

The board of directors of UCP (the “UCP Board”) recommends that UCP stockholders vote FOR the proposal to adopt the Merger Agreement and FOR each of the other proposals to be voted on at the UCP special meeting, as described in more detail in the accompanying proxy statement/prospectus. In considering the recommendations of the UCP Board, you should be aware that certain directors and executive officers of UCP will have interests in the Merger that may be different from, or in addition to, the interests of UCP stockholders generally. See the section entitled “Proposal I: Adoption of the Merger Agreement—Interests of Certain UCP Directors and Officers in the Merger” beginning on page 92 of the accompanying proxy statement/prospectus.

The accompanying proxy statement/prospectus provides important information regarding the UCP special meeting and a detailed description of the Merger Agreement, the Merger and the other transactions contemplated thereby, and the matters to be presented at the UCP special meeting. We urge you to read the accompanying proxy statement/prospectus (and any documents incorporated by reference into the accompanying proxy statement/prospectus) carefully and in its entirety. Please pay particular attention to “Risk Factors” beginning on page 34 of the accompanying proxy statement/prospectus.

We hope to see you at the UCP special meeting and look forward to the successful completion of the Merger.

Sincerely,

 

LOGO

Dustin L. Bogue

President and Chief Executive Officer

UCP, Inc.

Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued in connection with the Merger described in the accompanying proxy statement/prospectus or determined that the accompanying proxy statement/prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The accompanying proxy statement/prospectus is dated                 , 2017 and is first being mailed to UCP stockholders on or about             , 2017.


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LOGO

UCP, INC.

99 Almaden Boulevard, Suite 400

San Jose, California 95113

 

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

To be Held on                 , 2017

Dear Fellow Stockholders:

We are pleased to invite you to attend the special meeting of stockholders of UCP, Inc. (“UCP”) to be held on                 , 2017 at         a.m., local time, at                 , for the following purposes:

 

    To consider and vote on the adoption of the Agreement and Plan of Merger, dated April 10, 2017 (as it may be amended from time to time, the “Merger Agreement”) (a copy of which is attached as Annex A to the accompanying proxy statement/prospectus), by and among Century Communities, Inc. (“Century Communities”), Casa Acquisition Corp. (“Merger Sub”), and UCP. The Merger Agreement provides that UCP will merge with and into Merger Sub (the “Merger”), with Merger Sub surviving the Merger as a wholly owned subsidiary of Century Communities, and UCP no longer being a public company; and

 

    To consider and vote on a proposal to adjourn the UCP special meeting, or any adjournments thereof, to another time or place, if necessary or appropriate, as determined by UCP, to solicit additional proxies if there are insufficient votes at the time of the UCP special meeting or any adjournments thereof to adopt the Merger Agreement.

UCP will transact no other business at the UCP special meeting except such business as may properly be brought before the UCP special meeting or any adjournment or postponement thereof. Please refer to the accompanying proxy statement/prospectus for further information with respect to the business to be transacted at the UCP special meeting.

The board of directors of UCP (the “UCP Board”) has fixed the close of business on                 , 2017 as the record date (the “Record Date”) for the UCP special meeting. Only holders of record of UCP Common Stock as of the Record Date are entitled to notice of, and to vote at, the UCP special meeting or any adjournment or postponement thereof. Completion of the Merger is conditioned on, among other things, adoption of the Merger Agreement by the UCP stockholders.

Adoption of the Merger Agreement requires the affirmative vote of holders of a majority of the voting power of the outstanding shares of UCP Class A Common Stock and UCP Class B Common Stock, voting together as a single class. Approval of the adjournment proposal requires the affirmative vote of holders of a majority of the votes which could be cast by the holders of all classes of stock entitled to vote on such question which are present in person or by proxy at the meeting.

The UCP Board recommends that UCP stockholders vote FOR the adoption of the Merger Agreement and FOR the adjournment proposal.

Your vote is very important. Whether or not you plan to attend the UCP special meeting, please act promptly to submit a proxy to vote your shares with respect to the proposals described above. You may submit a proxy to vote your shares by completing, signing and dating the enclosed proxy card and returning it in the postage-paid envelope provided. You also may submit a proxy to vote your shares by


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telephone or through the Internet by following the instructions set forth on the proxy card. If you attend the UCP special meeting, you may vote your shares in person, even if you have previously submitted a proxy in writing, by telephone or through the Internet. If your shares are held in the name of a nominee or intermediary, please follow the instructions on the voting instruction card furnished by such record holder.

We urge you to read the accompanying proxy statement/prospectus, including all documents incorporated by reference into the accompanying proxy statement/prospectus, and its annexes carefully and in their entirety. In particular, see “Risk Factors” beginning on page 34 of the accompanying proxy statement/prospectus. If you have any questions concerning the Merger Agreement, the Merger or the other transactions contemplated thereby, the UCP special meeting or the accompanying proxy statement/prospectus, would like additional copies of the accompanying proxy statement/prospectus, or need help submitting a proxy to have your shares of UCP Common Stock voted, please contact UCP’s proxy solicitor:

 

LOGO

105 Madison Avenue

New York, New York 10016

Telephone: (800) 322-2885

Email: proxy@mackenziepartners.com

By Order of the Board of Directors,

 

LOGO

W. Allen Bennett

Vice President and General Counsel

                , 2017


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ADDITIONAL INFORMATION

The accompanying document is the proxy statement of UCP for its special meeting of stockholders and the prospectus of Century Communities relating to the offer and sale of Century Communities Common Stock to be issued to UCP stockholders in the Merger. The accompanying proxy statement/prospectus incorporates important business and financial information about Century Communities and UCP from documents that are not included in or delivered with the accompanying proxy statement/prospectus. This information is available to you without charge upon your written or oral request. You can obtain documents incorporated by reference into the accompanying proxy statement/prospectus by requesting them in writing or by telephone from Century Communities or UCP at the following addresses and telephone numbers:

 

Century Communities, Inc.

8390 East Crescent Parkway, Suite 650

Greenwood Village, Colorado 80111

Attention: Corporate Secretary

Telephone: (303) 770-8300

  

UCP, Inc.

99 Almaden Boulevard, Suite 400

San Jose, California 95113

Attention: Investor Relations

Telephone: (408) 207-9499 Ext. 476

In addition, if you have questions about the Merger, the other transactions contemplated by the Merger Agreement, or the accompanying proxy statement/prospectus, would like additional copies of the accompanying proxy statement/prospectus, or need to obtain proxy cards or other information related to the proxy solicitation, please contact UCP’s proxy solicitor:

LOGO

105 Madison Avenue

New York, New York 10016

Telephone: (800) 322-2885

Email: proxy@mackenziepartners.com

You will not be charged for any of these documents that you request. If you would like to request any documents, please do so by                 , 2017 to receive them before the UCP special meeting.

See also “Where You Can Find More Information” beginning on page 152 of the accompanying proxy statement/prospectus for further information.


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ABOUT THIS PROXY STATEMENT/PROSPECTUS

This proxy statement/prospectus, which forms part of a registration statement on Form S-4 filed by Century Communities with the U.S. Securities and Exchange Commission, constitutes a prospectus of Century Communities under Section 5 of the Securities Act of 1933, as amended, with respect to the shares of Century Communities Common Stock to be issued to UCP stockholders pursuant to the Merger Agreement. This proxy statement/prospectus also constitutes a proxy statement for UCP under Section 14(a) of the Securities Exchange Act of 1934, as amended. In addition, it constitutes a notice of meeting with respect to the special meeting of UCP stockholders.

You should rely only on the information contained in or incorporated by reference into this 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 proxy statement/prospectus. This proxy statement/prospectus is dated                 , 2017. You should not assume that the information contained in this proxy statement/prospectus is accurate as of any date other than that date. You should not assume that the information incorporated by reference into this proxy statement/prospectus is accurate as of any date other than the date of such information. Neither our mailing of this proxy statement/prospectus to UCP stockholders nor the issuance by Century Communities of shares of Century Communities Common Stock pursuant to the Merger Agreement will create any implication to the contrary.

This proxy statement/prospectus shall not constitute an offer to sell, or the solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction where, or to or from any person to whom, it is unlawful to make any such offer or solicitation. Information contained in this proxy statement/prospectus regarding Century Communities has been provided by Century Communities and information contained in this proxy statement/prospectus regarding UCP has been provided by UCP.

Unless otherwise indicated or as the context otherwise requires, a reference in this proxy statement/prospectus to:

 

    “adjournment proposal” means the proposal to approve the adjournment of the UCP special meeting, or any adjournments thereof, to another time or place, if necessary or appropriate, as determined by UCP, to solicit additional proxies if there are insufficient votes at the time of the UCP special meeting or any adjournments thereof to adopt the Merger Agreement;

 

    “Century Communities” means Century Communities, Inc., a Delaware corporation;

 

    “Century Communities Board” means the board of directors of Century Communities;

 

    “Century Communities Charter” means the Certificate of Incorporation of Century Communities effective as of April 30, 2013, as amended by the Certificate of Amendment of Certificate of Incorporation of Century Communities, Inc., effective as of April 30, 2013;

 

    “Century Communities Bylaws” means the Bylaws of Century Communities, Inc., effective as of April 30, 2013, as amended by the Amendment to the Bylaws of Century Communities, Inc., adopted and effective on April 10, 2017;

 

    “Century Communities Common Stock” means the common stock, par value $0.01 per share, of Century Communities;

 

    “Citi” means Citigroup Global Markets Inc., UCP’s financial advisor in connection with the Merger;

 

    “Code” means the Internal Revenue Code of 1986, as amended;

 

    “combined company” means Century Communities, following the Merger;

 

    “DGCL” means the General Corporation Law of the State of Delaware;

 

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    “dissenters’ shares” means shares of UCP Common Stock that are issued and outstanding immediately prior to the effective time of the Merger that are held by any UCP stockholder who is entitled to demand and who properly demands appraisal of such stockholder’s shares pursuant to, and in compliance in all respects with, the provisions of Section 262 of the DGCL;

 

    “EBITDA” means earnings before interest, income taxes, depreciation and amortization;

 

    “Exchange Act” means the Securities Exchange Act of 1934, as amended;

 

    “Exchange Agent” means U.S. Bank National Association, a national banking association organized and existing under the United States of America;

 

    “Exchange Rate” has the meaning set forth in the Exchange Agreement, dated as of July 23, 2013, by and among UCP, UCP, LLC, and PICO.

 

    “FASB” means the Financial Accounting Standards Board;

 

    “fractional share” means a fractional share of Century Communities Common Stock;

 

    “GAAP” means U.S. Generally Accepted Accounting Principles;

 

    “Greenberg Traurig” means Greenberg Traurig, LLP, counsel to Century Communities;

 

    “IRS” means the Internal Revenue Service;

 

    “Merger Agreement” means the Agreement and Plan of Merger, dated April 10, 2017, among Century Communities, Merger Sub, and UCP, as it may be amended from time to time, a copy of which is attached as Annex A to this proxy statement/prospectus and incorporated by reference herein;

 

    “Merger Consideration” means the consideration payable in the Merger by Century Communities to UCP stockholders in respect of each share of UCP Class A Common Stock outstanding immediately prior to the effective time of the Merger (other than dissenters’ shares or treasury shares held by UCP and any shares of UCP Class A Common Stock owned by any UCP subsidiary, Century Communities or Century Communities subsidiary) consisting of (i) $5.32 in cash, without any interest thereon, and (ii) 0.2309 of a duly authorized, fully paid and non-assessable share of Century Communities Common Stock;

 

    “Merger Sub” means Casa Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of Century Communities;

 

    “Merger” means, as contemplated by the Merger Agreement, the merger of UCP with and into Merger Sub, with Merger Sub as the surviving corporation in such merger; the result of which is the legacy business and subsidiaries of UCP becoming direct and indirect wholly-owned subsidiaries of Century Communities;

 

    “NYSE” means the New York Stock Exchange;

 

    “Outside Date” means October 15, 2017;

 

    “Paul, Weiss” means Paul, Weiss, Rifkind, Wharton & Garrison LLP, counsel to UCP;

 

    “PICO” means PICO Holdings, Inc., a California corporation and the majority stockholder of UCP;

 

    “Record Date” means the close of business on                 , 2017, the date and time as of which holders of UCP Common Stock must be holders of record in order to receive notice of, and to vote at, the UCP special meeting.

 

    “SEC” means the U.S. Securities and Exchange Commission;

 

    “Securities Act” means the Securities Act of 1933, as amended;

 

    “Stock Exchange Ratio” means 0.2309;

 

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    “UCP” means UCP, Inc., a Delaware corporation;

 

    “UCP Board” means the board of directors of UCP;

 

    “UCP Bylaws” means the Amended and Restated Bylaws of UCP, amended and effective as of July 17, 2013, as amended by the Amendment to the Amended and Restated Bylaws of UCP, Inc., dated December 28, 2016, and by the Amendment to the Amended and Restated Bylaws of UCP, Inc., dated April 10, 2017;

 

    “UCP Charter” means the Amended and Restated Certificate of Incorporation of UCP, amended and effective as of May 7, 2013;

 

    “UCP Class A Common Stock” means the Class A Common Stock, par value $0.01 per share, of UCP;

 

    “UCP Class B Common Stock” means the Class B Common Stock, par value $0.01 per share, of UCP;

 

    “UCP Common Stock” means the UCP Class A Common Stock and the UCP Class B Common Stock;

 

    “UCP, LLC” means UCP, LLC, a Delaware limited liability company and subsidiary of UCP;

 

    “UCP Projections” refer to the information provided under “Proposal I: Adoption of the Merger Agreement—UCP Unaudited Prospective Financial Information”; and

 

    “Voting Agreement” means the Voting Support and Transfer Restriction Agreement, dated April 10, 2017, by and among Century Communities, Merger Sub, PICO, for the limited purposes set forth therein, UCP, and for the limited purposes set forth therein, UCP, LLC, as it may be amended from time to time, a copy of which is attached as Annex B to this proxy statement/prospectus and incorporated by reference herein.

 

 

 

 

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TABLE OF CONTENTS

 

     Page  

QUESTIONS AND ANSWERS

     1  

SUMMARY

     10  

The Companies

     10  

UCP Special Meeting

     12  

The Merger Agreement and the Merger

     14  

The Voting Agreement

     14  

Merger Consideration

     15  

UCP’s Reasons for the Merger; Recommendation of the UCP Board of Directors

     16  

Opinion of UCP’s Financial Advisor

     16  

Interests of Certain UCP Directors and Officers in the Merger

     16  

Board of Directors and Management Following the Merger

     17  

Treatment of UCP Equity Awards in the Merger

     17  

Certain Material U.S. Federal Income Tax Consequences of the Merger

     17  

Accounting Treatment of the Merger

     18  

Regulatory Approvals Required to Complete the Merger

     18  

Litigation Relating to the Merger

     18  

Completion of the Merger is Subject to Certain Conditions

     19  

No Solicitation of Alternative Proposals

     20  

Termination of the Merger Agreement

     20  

Fees and Expenses and Termination Fees

     20  

Listing of Shares of Century Communities Common Stock and Delisting and Deregistration of UCP Class A Common Stock

     21  

Comparison of Stockholder Rights

     21  

Appraisal Rights

     21  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF CENTURY COMMUNITIES

     22  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF UCP

     24  

SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA

     27  

COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA

     28  

COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION

     30  

CAUTIONARY INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

     32  

RISK FACTORS

     34  

THE COMPANIES

     48  

UCP SPECIAL MEETING

     51  

Date, Time and Location

     51  

Purpose

     51  

Recommendation of the UCP Board of Directors

     51  

Record Date; Outstanding Shares; Stockholders Entitled to Vote

     51  

Quorum

     52  

Required Vote

     53  

Share Ownership of and Voting by UCP Directors and Executive Officers

     53  

Voting of Shares

     53  

Revocability of Proxies; Changing Your Vote

     54  

Solicitation of Proxies; Expenses of Solicitation

     55  

Householding

     55  

Adjournment

     55  

Tabulation of Votes; Methods of Voting; Results

     55  

Other Information

     56  

Assistance; Proxy Solicitor

     56  

 

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TABLE OF CONTENTS

 

     Page  

PROPOSAL I: ADOPTION OF THE MERGER AGREEMENT

     57  

General

     57  

Effects of the Merger

     57  

Background of the Merger

     57  

UCP’s Reasons for the Merger; Recommendation of the UCP Board of Directors

     70  

Opinion of UCP’s Financial Advisor

     77  

Century Communities Unaudited Prospective Financial Information

     85  

UCP Unaudited Prospective Financial Information

     88  

Interests of Certain UCP Directors and Officers in the Merger

     92  

Board of Directors and Management Following the Merger

     94  

Treatment of UCP Equity Awards

     94  

Material U.S. Federal Income Tax Consequences of the Merger

     95  

Accounting Treatment of the Merger

     99  

Regulatory Approvals Required to Complete the Merger

     99  

Litigation Relating to the Merger

     99  

Exchange of Shares in the Merger

     100  

Dividends and Share Repurchases

     101  

Listing of Shares of Century Communities Common Stock and Delisting and Deregistration of UCP Class A Common Stock

     101  

Appraisal Rights

     101  

THE MERGER AGREEMENT

     103  

THE VOTING AGREEMENT

     120  

PROPOSAL II: ADJOURNMENT OF UCP SPECIAL MEETING

     122  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

     123  

NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

     129  

DESCRIPTION OF CENTURY COMMUNITIES CAPITAL STOCK

     135  

Authorized Shares

     135  

Provisions in the Century Communities Charter and Century Communities Bylaws With Possible Anti-Takeover Effects

     136  

COMPARISON OF STOCKHOLDER RIGHTS

     138  

APPRAISAL RIGHTS

     143  

LEGAL MATTERS

     149  

EXPERTS

     149  

Century Communities

     149  

UCP

     149  

FUTURE STOCKHOLDER PROPOSALS

     150  

WHERE YOU CAN FIND MORE INFORMATION

     152  

Century Communities’ SEC Filings

     152  

UCP’s SEC Filings

     152  

ANNEXES

  

Annex A: Merger Agreement

     A-1  

Annex B: Voting Agreement

     B-1  

Annex C: Opinion of Citigroup Global Markets Inc.

     C-1  

Annex D: DGCL Section 262

     D-1  

 

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QUESTIONS AND ANSWERS

The following questions and answers are intended to address some commonly asked questions regarding the Merger, the Merger Agreement, certain voting procedures and other matters with respect to the special meeting of UCP stockholders. These questions and answers may not address all questions that may be important to UCP stockholders. To better understand these matters, and for a more complete description of the terms of the Merger Agreement, the Voting Agreement, the Merger and the other transactions contemplated thereby including, certain risks relating to the Merger and Century Communities following the Merger, and the proceedings to be conducted at the UCP special meeting, you should carefully read this entire proxy statement/prospectus, including each of the attached annexes, as well as the documents that have been incorporated by reference into this proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 152 of this proxy statement/prospectus.

 

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

 

A: On April 10, 2017, Century Communities, Merger Sub, and UCP entered into the Merger Agreement that is described in this proxy statement/prospectus. A copy of the Merger Agreement is attached as Annex A to this proxy statement/prospectus and is incorporated by reference herein. In order to complete the Merger, among other things, UCP stockholders must affirmatively vote to adopt the Merger Agreement.

UCP is holding a special meeting of stockholders to obtain the requisite approval of its stockholders of the adoption of the Merger Agreement. In addition, UCP stockholders will also be asked to approve the adjournment proposal. UCP’s named executive officers are identified under “Proposal I: Adoption of the Merger Agreement—Interests of Certain UCP Directors and Officers in the Merger” beginning on page 92 of this proxy statement/prospectus.

This proxy statement/prospectus serves as both a proxy statement of UCP and a prospectus of Century Communities in connection with the Merger.

Your vote is very important. We encourage you to complete, sign, date and submit a proxy card to have your shares of UCP Common Stock voted as soon as possible.

 

Q: What will happen in the Merger?

 

A: In the Merger, UCP will be merged with and into Merger Sub, with Merger Sub being the surviving corporation. As a result of the Merger, Merger Sub, together with the legacy business and subsidiaries of UCP, will become direct and indirect wholly-owned subsidiaries of Century Communities, UCP’s separate corporate existence will cease to exist, and UCP will no longer be a publicly traded company. See “The Merger Agreement—Structure and Effect of the Merger” and the Merger Agreement attached as Annex A to this proxy statement/prospectus for more information about the Merger.

 

Q: What will UCP stockholders receive in the Merger?

 

A: At the effective time of the Merger each share of UCP Class A Common Stock (other than dissenters’ shares or treasury shares held by UCP and any shares of UCP Class A Common Stock owned by any UCP subsidiary, Century Communities or Century Communities subsidiary) will be converted into the right to receive and become exchangeable for the Merger Consideration, consisting of (i) $5.32 in cash, without any interest thereon, and (ii) 0.2309 of a duly authorized, fully paid and non-assessable share of Century Communities Common Stock. No fractional shares will be issued in the Merger, and UCP stockholders will receive cash in lieu of any fractional shares.

Based on the closing sale price of a share of Century Communities Common Stock as reported on NYSE on April 10, 2017, the last trading day before the public announcement of the Merger Agreement, the Merger

 

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Consideration represented approximately $11.35 in value per share of UCP Class A Common Stock. Based on the closing sale price of a share of Century Communities Common Stock on NYSE on                 , 2017, the most recent practicable trading day prior to the date of this proxy statement/prospectus, the Merger Consideration represented approximately $         in value per share of UCP Class A Common Stock.

Because Century Communities will, in addition to the payment of $5.32 of cash consideration, issue in the Merger to UCP stockholders a fixed number of shares (0.2309) of Century Communities Common Stock in exchange for each share of UCP Class A Common Stock and because there will be no adjustment made to such fixed number of shares, the aggregate value of the Merger Consideration that UCP stockholders will receive in the Merger will depend on the then-current NYSE market price of shares of Century Communities Common Stock at the effective time of the Merger. As a result, the value of the Merger Consideration that UCP stockholders will receive in the Merger could be greater than, less than, or the same as, the value of the Merger Consideration on the date of this proxy statement/prospectus or at the time of the UCP special meeting.

 

Q: What happens if the Merger is not completed?

 

A: If the Merger is not completed for any reason, UCP stockholders will not receive any Merger Consideration for their shares of UCP Class A Common Stock, and UCP will remain an independent public company with UCP Class A Common Stock continuing to be traded on NYSE.

 

Q: If I am a UCP stockholder, how will I receive the Merger Consideration to which I became entitled?

 

A: Following the completion of the Merger, the Exchange Agent will forward to you a form letter of transmittal to be completed, signed and mailed by you to the Exchange Agent. Upon receipt by the Exchange Agent of your properly completed, signed and dated letter of transmittal, a certificate (or certificates), or a book-entry notation, evidencing the Century Communities Common Stock you are entitled to receive, together with a check representing cash, including any cash in lieu of fractional shares you are entitled to receive, will be sent to you. For more information about the exchange of shares of UCP Class A Common Stock for shares of Century Communities Common Stock and cash, see “Proposal I: Adoption of the Merger Agreement—Exchange of Shares in the Merger” beginning on page 100 of this proxy statement/prospectus.

 

Q: When and where will the UCP special meeting be held?

 

A: The UCP special meeting will be held on                 , 2017, at                 a.m. local time, at                 .

 

Q: What are UCP stockholders being asked to vote on?

 

A: UCP stockholders are being asked to vote on:

 

    Proposal I: a proposal to adopt the Merger Agreement, pursuant to which UCP will merge with and into Merger Sub, with Merger Sub continuing as the surviving corporation in such Merger, such that the separate corporate existence of UCP will cease to exist, UCP no longer will be a publicly traded company, and the legacy business and subsidiaries of UCP will become direct and indirect wholly-owned subsidiaries of Century Communities; and

 

    Proposal II: the adjournment proposal.

The adoption by UCP stockholders of the Merger Agreement is a condition to the obligations of Century Communities and of UCP to complete the Merger. The approval of the adjournment proposal is not a condition to the obligations of Century Communities or of UCP to complete the Merger.

 

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Q: Who is entitled to vote at the UCP special meeting?

 

A: UCP has two classes of voting stock issued and outstanding, the UCP Class A Common Stock and the UCP Class B Common Stock (referred to collectively as the UCP Common Stock), which generally vote together as a single class on all matters presented to UCP stockholders for their vote or approval. Only holders of record of UCP Common Stock as of the Record Date, the close of business on                 , 2017, are entitled to vote at the UCP special meeting or any adjournment or postponement thereof.

As of the Record Date, there were                 shares of UCP Class A Common Stock outstanding and 100 shares of UCP Class B Common Stock outstanding. Each outstanding share of UCP Class A Common Stock is entitled to one vote on each matter to be acted upon at the UCP special meeting. Each outstanding share of UCP Class B Common Stock is entitled to, without regard to the number of shares of UCP Class B Common Stock held by the holder of such share, a number of votes equal to the number of Series A Units of UCP, LLC held by such holder, multiplied by the Exchange Rate. As of the Record Date, the sole holder of record of all outstanding shares of UCP Class B Common Stock was PICO, and PICO held 10,593,000 Series A Units of UCP, LLC, which are exchangeable for 10,401,722 shares of UCP Class A Common Stock.

 

Q: How does the UCP Board recommend that UCP stockholders vote?

 

A: At a meeting of the UCP Board held on April 10, 2017, at which all of the UCP directors were present, the UCP Board unanimously determined that the Merger Agreement and the other transactions contemplated by the Merger Agreement, including the Merger, are fair to, and in the best interests of, UCP and its stockholders, and approved and declared advisable the Merger Agreement and the other transactions contemplated by the Merger Agreement, including the proposed Merger.

The UCP Board recommends that UCP stockholders vote FOR the adoption of the Merger Agreement, and FOR the adjournment proposal. See “Proposal I: Adoption of the Merger Agreement—UCP’s Reasons for the Merger; Recommendation of the UCP Board of Directors” and “Proposal II: Adjournment of UCP Special Meeting” beginning on pages 70 and 122, respectively, of this proxy statement/prospectus.

 

Q: What UCP stockholder vote is required for the adoption of the Merger Agreement and the approval of the adjournment proposal, and what happens if I abstain?

 

A: The following are the vote requirements:

 

    Adoption of the Merger Agreement: The affirmative vote, in person or by proxy, of holders of a majority of the voting power of the outstanding shares of UCP Class A Common Stock and UCP Class B Common Stock, voting together as a single class, is required to adopt the Merger Agreement. Accordingly, shares deemed not in attendance at the UCP special meeting, whether due to a record holder’s failure to vote or a “street name” holder’s failure to provide any voting instructions to such holder’s nominee or intermediary, abstentions and broker non-votes will have the same effect as a vote against the adoption of the Merger Agreement.

 

    Adjournment of UCP Special Meeting: The affirmative vote, in person or by proxy, of holders of a majority of the votes which could be cast by the holders of all classes of stock entitled to vote on such question which are present in person or by proxy at the UCP special meeting is required to approve the adjournment proposal. Accordingly, abstentions will have the same effect as a vote against the proposal, but shares deemed not in attendance at the meeting, whether due to a record holder’s failure to vote or a “street name” holder’s failure to provide any voting instructions to such holder’s nominee or intermediary, and broker non-votes will have no effect on the proposal.

 

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Q: How many votes do I and others have?

 

A: Holders of UCP Class A Common Stock and UCP Class B Common Stock generally vote together as a single class on all matters presented to UCP stockholders for their vote or approval, including the proposal to adopt the Merger Agreement and the adjournment proposal to be presented at the UCP special meeting. Holders of UCP Class A Common Stock are entitled to one vote for each share of UCP Class A Common Stock owned as of the Record Date. PICO holds all of the outstanding shares of UCP Class B Common Stock, which entitles PICO, without regard to the number of shares of UCP Class B Common Stock held by it, to one vote for each Series A Unit of UCP, LLC held by PICO, multiplied by the Exchange Rate. As of the Record Date, there were                 outstanding shares of UCP Class A Common Stock, and PICO held 10,593,000 Series A Units of UCP, LLC, which are exchangeable for 10,401,722 shares of UCP Class A Common Stock.

In connection with the execution of the Merger Agreement, PICO entered into the Voting Agreement with Century Communities. As of the Record Date, the shares of UCP Class B Common Stock held by PICO subject to the Voting Agreement represent approximately 57% of the aggregate voting power of the UCP Common Stock. PICO has agreed in the Voting Agreement to, among other things, vote all shares of UCP capital stock held by it (i) in favor of the adoption of the Merger Agreement and any action required in furtherance thereof, (ii) against approval of any proposal made in opposition to, in competition with, or that would result in a breach of the Merger Agreement or the Merger or any other transactions contemplated by the Merger Agreement, and (iii) against certain other actions that are intended or would reasonably be expected to prevent, interfere with, or materially impair or delay, the consummation of the Merger or any of the other transactions contemplated by the Merger Agreement in accordance with their terms. The Voting Agreement terminates automatically on the first to occur of (i) the termination of the Merger Agreement in accordance with its terms, and (ii) the effective time of the Merger. In addition, if the UCP Board changes its recommendation with respect to the Merger Agreement due to an “Intervening Event” (as defined in the Merger Agreement) and Century Communities does not exercise its right to terminate the Merger Agreement, PICO’s voting obligations as described above will not apply to all shares of UCP capital stock held by PICO but, in lieu and instead thereof, will be in respect of a number of shares of UCP Common Stock equal to 28% of the aggregate voting power of all outstanding shares of UCP Common Stock.

 

Q: Why are the Merger Agreement and the Merger not being considered and voted upon by Century Communities’ stockholders?

 

A: Under Delaware law, Century Communities stockholders are not required to consider and vote to adopt the Merger Agreement. Under NYSE rules, stockholder approval is required prior to the issuance by an NYSE-listed issuer of common stock in a business combination transaction if the number of shares of common stock to be issued in the business combination equals 20% or more of the number of shares of common stock outstanding before such issuance. The issuance by Century Communities in the Merger of approximately 4.2 million shares of Century Communities Common Stock will not equal 20% or more of the total issued and outstanding shares of Century Communities Common Stock at the time of issuance.

 

Q: Are there any important risks related to the Merger or Century Communities’ or UCP’s businesses of which I should be aware?

 

A: Yes, there are important risks related to the Merger and each of Century Communities’ and UCP’s businesses. Before making any decision on how to vote, Century Communities and UCP urge you to read carefully and in its entirety “Risk Factors” beginning on page 34 of this proxy statement/prospectus. You also should read and carefully consider the risk factors relating to Century Communities and UCP contained in the documents that are incorporated by reference into this proxy statement/prospectus, including Century Communities’ and UCP’s respective Annual Reports on Form 10-K for the fiscal year ended December 31, 2016 (in UCP’s case, as amended by Amendment Number 1 to the 2016 Annual Report on Form 10-K/A, filed with the SEC on April 28, 2017), as updated from time to time in each company’s subsequent filings with the SEC.

 

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Q: Do UCP directors and officers have interests that may differ from those of other UCP stockholders?

 

A: Yes. In considering the recommendation of the UCP Board that UCP stockholders vote FOR the adoption of the Merger Agreement, UCP stockholders should be aware and take into account the fact that certain UCP directors and executive officers have interests in the Merger that may be different from, or in addition to, the interests of UCP stockholders generally and that may create potential conflicts of interest. The UCP Board was aware of and carefully considered these interests, among other matters, in evaluating the terms and structure, and overseeing the negotiation of, the Merger, in approving the Merger Agreement and in recommending that UCP stockholders vote FOR the adoption of the Merger Agreement and FOR the adjournment proposal. See “Proposal I: Adoption of the Merger Agreement—Interests of Certain UCP Directors and Officers in the Merger” beginning on page 92 of this proxy statement/prospectus.

 

Q: What constitutes a quorum for the UCP special meeting?

 

A: A quorum of outstanding shares is necessary to take action at the UCP special meeting. The presence in person or by proxy of the holders of stock having a majority of the votes which could be cast by the holders of all outstanding classes of stock entitled to vote at the meeting will constitute a quorum at the UCP special meeting. The inspector of election appointed for the UCP special meeting will determine whether a quorum is present. The inspector of election will treat abstentions and broker non-votes as present for purposes of determining the presence of a quorum.

 

Q: How do I vote?

 

A: If you are a stockholder of record as of the Record Date for the UCP special meeting, you may attend the UCP special meeting and vote your shares in person. You also may choose to submit your proxies by any of the following methods:

 

    By Mail. If you choose to submit your proxy to vote by mail, simply complete the enclosed proxy card, date and sign it, and return it in the postage-paid envelope provided;

 

    By Telephone. You may submit your proxy to vote your shares by telephone by calling the toll-free number provided on your proxy card any time up to         p.m. Eastern Time, on                 , 2017; or

 

    Through the Internet. You may also submit your proxy to vote through the Internet by signing on to the website identified on your proxy card and following the procedures described in the website any time up to         p.m. Eastern Time, on                 , 2017.

If you are a beneficial owner and hold your shares in street name, or through a nominee or intermediary, such as a bank or broker, you will receive separate instructions from such nominee or intermediary describing how to vote your shares. The availability of telephonic or internet voting will depend on the intermediary’s voting process. Please check with your nominee or intermediary and follow the voting instructions provided by your nominee or intermediary with these materials.

 

Q: What is a “broker non-vote”?

 

A:

If a holder of UCP Class A Common Stock is a beneficial owner of shares held in “street name” by a bank, broker, trust company or other nominee and does not provide the organization that holds its shares with specific voting instructions, then, under applicable rules, the organization that holds its shares may generally vote on “routine” matters but cannot vote on “non-routine” matters. Both of the proposals to be voted on at the UCP special meeting are “non-routine” matters. If the organizations that holds the beneficial owner’s shares does not receive instructions from such UCP stockholder on how to vote its shares on either proposal to be voted on at the UCP special meeting, that bank, broker, trust company or other nominee will inform the inspector of election at the UCP special meeting that it does not have authority to vote on any proposal at the UCP special meeting with respect to such shares, and, furthermore, such shares will not be deemed to

 

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  be in attendance at the meeting. However, if the bank, broker, trust company or other nominee receives instructions from such UCP stockholder on how to vote its shares as to only one proposal, the shares will be voted as instructed on that proposal but will not be voted on the other, uninstructed proposal. This is generally referred to as a “broker non-vote.”

 

Q: If my shares are held in street name, will my nominee or intermediary automatically vote my shares for me?

 

A: No. If your shares of UCP Class A Common Stock are held in street name, you must instruct your nominee or intermediary how to vote your shares. Your nominee or intermediary will vote your shares only if you provide instructions on how to vote by properly completing the voting instruction form sent to you by your nominee or intermediary with this proxy statement/prospectus.

 

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

 

A: If you return your signed and dated proxy card without indicating how to vote your shares on any particular proposal, the UCP Common Stock represented by your proxy will be voted in accordance with the recommendation of the UCP Board.

 

Q: Is my vote important?

 

A: Yes, your vote is very important. The Merger cannot be completed without the adoption of the Merger Agreement by UCP stockholders.

The UCP Board recommends that UCP stockholders vote FOR the adoption of the Merger Agreement.

 

Q. Can I revoke my proxy or change my voting instructions?

 

A: Yes. You may revoke your proxy or change your vote, at any time, before your proxy is voted at the UCP special meeting.

If you are a holder of record as of the Record Date, you can revoke your proxy or change your vote by:

 

    sending a written notice stating that you revoke your proxy to the Secretary of UCP, at UCP’s offices at 99 Almaden Boulevard, Suite 400, San Jose, California 95113, Attention: Secretary, that bears a date later than the date of the previously submitted proxy that you want to revoke and is received by UCP’s Secretary prior to the UCP special meeting;

 

    submitting a valid, later-dated proxy via mail, over the telephone or through the Internet; or

 

    attending the UCP special meeting and voting in person, which will automatically cancel any proxy previously given, or revoking your proxy in person, but your attendance alone will not constitute a vote or revoke any proxy previously given.

If you hold your shares in street name, you must contact your nominee or intermediary to change your vote or obtain a legal proxy to vote your shares if you wish to cast your vote in person at the UCP special meeting.

 

Q: What happens if I transfer my shares of UCP Class A Common Stock before the UCP special meeting?

 

A: The Record Date is earlier than the date of the UCP special meeting and the date that the Merger is expected to be completed. If you transfer your shares of UCP Class A Common Stock after the Record Date, but before the UCP special meeting, you will retain your right to vote at the UCP special meeting. However, you will have transferred the right to receive the Merger Consideration in the Merger. In order to receive the Merger Consideration, you must hold your shares of UCP Class A Common Stock through the effective time of the Merger.

 

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Q: What do I do if I receive more than one set of voting materials?

 

A: You may receive more than one set of voting materials, including multiple copies of this proxy statement/prospectus, the proxy card or the voting instruction form. This can occur if you hold your shares in more than one brokerage account, if you hold shares directly as a holder of record and also in street name, or otherwise through another holder of record, and in certain other circumstances. If you receive more than one set of voting materials, please vote or return each set separately in order to ensure that all of your shares are voted.

 

Q: What will happen if all of the proposals to be considered at the UCP special meeting are not approved?

 

A: As a condition to completion of the Merger, UCP stockholders must adopt the Merger Agreement at the UCP special meeting. Completion of the Merger is not conditioned or dependent upon the approval of the adjournment proposal.

 

Q: Are UCP stockholders entitled to seek appraisal rights if they do not vote FOR the adoption of the Merger Agreement?

 

A: Yes. Under Delaware law, record holders of UCP Common Stock who do not vote in favor of the adoption of the Merger Agreement and who continuously hold their shares of UCP Common Stock through the effective time of the Merger and otherwise comply in all respects with the procedures set forth in Section 262 of the DGCL, will be entitled to seek appraisal rights in connection with the Merger, and if the Merger is completed, obtain payment in cash of the fair value of their shares of UCP Common Stock as determined by the Delaware Court of Chancery, instead of receiving the Merger Consideration for their shares. Under Section 262 of the DGCL, the Delaware Court of Chancery will dismiss any appraisal proceedings as to all stockholders who have perfected their appraisal rights unless (i) the total number of shares entitled to appraisal exceeds 1% of the outstanding shares of UCP Class A Common Stock, or (ii) the value of the Merger Consideration provided in the Merger Agreement for the total number of shares of UCP Class A Common Stock entitled to appraisal exceeds $1 million. To exercise appraisal rights, UCP stockholders must comply with the procedures prescribed by Section 262 of the DGCL. These procedures are summarized under “Appraisal Rights” beginning on page 143 of this proxy statement/prospectus. In addition, the full text of Section 262 of the DGCL is included as Annex D to this proxy statement/prospectus. Failure to comply with these provisions may result in a loss of the right of appraisal.

 

Q: What are the material U.S. federal income tax consequences of the Merger to U.S. holders of UCP Class A Common Stock?

 

A: The Merger is intended to qualify for U.S. federal income tax purposes as a “reorganization” within the meaning of Section 368(a) of the Code. Assuming that the Merger qualifies as a reorganization, a U.S. holder of UCP Class A Common Stock will generally recognize gain to the extent described below, but not loss, if the U.S. holder surrenders its shares of UCP Class A Common Stock in exchange for a combination of Century Communities Common Stock and cash. In such case, that U.S. holder will generally recognize gain equal to the lesser of (i) the cash received (other than cash in lieu of any fractional share) and (ii) the excess of the sum of the cash received (other than cash in lieu of any fractional share) and the fair market value (on the date of the Merger) of the Century Communities Common Stock received (including any fractional share for which cash was paid) over such U.S. holder’s adjusted tax basis in the shares of UCP Class A Common Stock surrendered by such U.S. holder in the Merger. In addition, such U.S. holder will generally recognize gain or loss on the receipt of cash in lieu of any fractional share. See “Proposal I: Adoption of the Merger Agreement—Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 95 of this proxy statement/prospectus for more information.

 

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Q: What are the conditions to the completion of the Merger?

 

A: Completion of the Merger is subject to certain closing conditions, including, but not limited to, the (i) adoption of the Merger Agreement by UCP stockholders; (ii) effectiveness of the registration statement under the Securities Act of which this proxy statement/prospectus is a part; and (iii) satisfaction (or to the extent permitted by applicable law, waiver) of other customary conditions to closing. See “The Merger Agreement—Conditions to Completion of the Merger” beginning on page 114 of this proxy statement/prospectus for more information.

 

Q: When is the Merger expected to be completed?

 

A: As of the date of this proxy statement/prospectus, it is not possible to accurately estimate the closing date for the Merger because the Merger is subject to the satisfaction (or, to the extent permitted by applicable law, waiver) of the conditions to Century Communities’ and UCP’s obligations to complete the Merger, some of which are not within the control of such parties; however, Century Communities and UCP currently expect the Merger to close during the third quarter of 2017. Accordingly, no assurance can be given as to when, or if, the Merger will be completed.

 

Q: Do I need to do anything at this time with my shares of UCP Common Stock other than voting on the proposals at the UCP special meeting?

 

A: If you are a UCP stockholder, you will be entitled to receive the Merger Consideration for your shares after the effective time of the Merger (assuming you do not properly exercise your appraisal rights in respect of such shares as described under “Appraisal Rights”). However, there is no action that you are requested to take at this time, other than affirmatively voting FOR the adoption of the Merger Agreement, and FOR the adjournment proposal in accordance with one of the methods of voting set forth in “UCP Special Meeting—Voting of Shares” beginning on page 53 of this proxy statement/prospectus.

 

Q: Should I send in my UCP stock certificates now to receive the Merger Consideration?

 

A: No. UCP stockholders should not send in their stock certificates to any person at this time. After the effective time of the Merger, Century Communities’ Exchange Agent will send you a letter of transmittal and instructions for exchanging your shares of UCP Class A Common Stock for the Merger Consideration. See “Proposal I: Adoption of the Merger Agreement—Exchange of Shares in the Merger” beginning on page 100 of this proxy statement/prospectus.

 

Q: Is the completion of the Merger subject to a financing condition?

 

A: No. The receipt of any financing by Century Communities is not a condition to completion of the Merger or any of the other transactions contemplated by the Merger Agreement and, except in certain limited circumstances in which Century Communities or UCP may be permitted to terminate the Merger Agreement (as more fully described in “The Merger Agreement—Termination of the Merger Agreement”), Century Communities will be required to complete the Merger (assuming that all of the conditions to its obligations to complete the Merger under the Merger Agreement are satisfied or waived) whether or not financing is available on acceptable terms or at all. Century Communities currently intends to pay the cash portion of the Merger Consideration, repay and redeem certain outstanding indebtedness of UCP and its subsidiaries, and pay related fees and expenses in connection with the Merger using cash on hand at the time of closing.

 

Q: How will UCP’s outstanding indebtedness be treated in the Merger?

 

A: Upon consummation of the Merger, Century Communities intends to repay or assume UCP’s project-level secured acquisition, development and constructions loans, which had approximately $87 million outstanding as of March 31, 2017, and redeem, satisfy and discharge UCP’s $75 million principal amount of 8.5% Senior Notes due 2017, to the extent still outstanding at the time of the consummation of the Merger.

 

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Q: Will the Century Communities Common Stock issued to UCP stockholders at the time of completion of the Merger be traded on an exchange?

 

A: Yes. It is a condition to completion of the Merger that the shares of Century Communities Common Stock to be issued to UCP stockholders in the Merger be approved for listing on the NYSE, subject to official notice of issuance. Shares of Century Communities Common are currently traded on the NYSE under the ticker symbol “CCS.”

 

Q: If I am a UCP stockholder, whom should I contact with questions?

 

A: If you have any questions about the Merger or the UCP special meeting, or desire additional copies of this proxy statement/prospectus, proxy cards or voting instruction forms, you should contact:

UCP, Inc.

99 Almaden Boulevard, Suite 400

San Jose, California 95113

Attention: Investor Relations

Email: Investorrelations@unioncommunityllc.com

Telephone: (408) 207-9499 Ext. 476

or

 

LOGO

105 Madison Avenue

New York, New York 10016

Telephone: (800) 322-2885

Email: proxy@mackenziepartners.com

 

Q: Where can I find more information about Century Communities and UCP?

 

A: You can find more information about Century Communities and UCP from the various sources described under “Where You Can Find More Information” beginning on page 152 of this proxy statement/prospectus.

 

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SUMMARY

This summary highlights selected information from this proxy statement/prospectus. It may not contain all of the information that is important to you. You are urged to read this entire proxy statement/prospectus and the other documents referred to or incorporated by reference into this proxy statement/prospectus in order to fully understand the Merger, the Merger Agreement and other matters to be considered at the UCP special meeting. See “Where You Can Find More Information” beginning on page 147 of this proxy statement/prospectus. Each item in this summary refers to the beginning page of this proxy statement/prospectus on which that subject is discussed in more detail.

The Companies (See page 48)

Century Communities, Inc.

Century Communities is engaged in the development, design, construction, marketing and sale of single-family attached and detached homes in metropolitan areas in Colorado, Austin and San Antonio, Texas (which we refer to as “Central Texas”), Houston, Texas, Las Vegas, Nevada, Atlanta, Georgia, Salt Lake City, Utah, and Charlotte, North Carolina. In many of its projects, in addition to building homes, Century Communities is responsible for the entitlement and development of the underlying land. Century Communities’ homebuilding operations are organized into the following seven operating segments based on the geographic markets in which it operates: Atlanta, Central Texas, Charlotte, Colorado, Houston, Nevada, and Utah. Additionally, Century Communities’ wholly owned subsidiaries, Inspire Home Loans Inc. and Parkway Financial Group LLC, which provide mortgage and title services to its home buyers, respectively, have been identified as its Financial Services operating segment.

Century Communities builds and sells an extensive range of home types across a variety of price points. Its emphasis is on acquiring well located land positions and offering quality homes with innovative design elements. The core of its business plan is to acquire and develop land strategically, based on its understanding of population growth patterns, entitlement restrictions and infrastructure development. Century Communities focuses on locations within its markets with convenient access to metropolitan areas that are generally characterized by diverse economic and employment bases and demographics and increasing populations. Century Communities believes these conditions create strong demand for new housing, and these locations represent what it believes to be attractive opportunities for long-term growth. Century Communities also seeks assets that have desirable characteristics, such as good access to major job centers, schools, shopping, recreation and transportation facilities, and it strives to offer a broad spectrum of product types in these locations. Product development and customer service are key components of the lifestyle connection Century Communities seeks to establish with each individual homebuyer. Century Communities’ construction expertise across an extensive product offering allows it flexibility to pursue a wide array of land acquisition opportunities and appeal to a broad range of potential homebuyers, from entry-level to first- and second-time move-up buyers and lifestyle homebuyers. Additionally, Century Communities believes its diversified product strategy enables it to adapt quickly to changing market conditions and to optimize returns while strategically reducing portfolio risk.

During the year ended December 31, 2016, Century Communities delivered 2,825 homes, with an average sales price of $346.5 thousand. During the same period, it generated approximately $978.7 million in home sales revenue, approximately $73.1 million in income before tax expense, and approximately $49.5 million in net income. For the year ended December 31, 2016, Century Communities’ net new home contracts totaled 2,860 homes, a 21.4% increase over the same period in 2015. On December 31, 2016, Century Communities had a backlog of 749 sold but unclosed homes, consisting of approximately $302.8 million in sales value, a 11.7% increase over the same period in 2015. Its results of operations are significantly impacted by its acquisitions of Peachtree Communities Group, Inc. and its affiliates and subsidiaries in November 2014, Grand View Builders in August 2014, and Las Vegas Land Holdings, LLC in April 2014. Subsequent to the acquisition, these operations became Century Communities’ Atlanta, Houston and Nevada operating segments, respectively.

 



 

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During 2016, Century Communities also invested for future growth through (i) its entrance into the Utah and North Carolina markets, (ii) commencing its wholly owned financing operations, Parkway Financial Group, and (iii) acquiring a 50% ownership in Wade Jurney Homes. Century Communities also continued to expand its future pipeline of land positions as it increased its total lots owned and under control from 13,160 as of December 31, 2015 to 18,296 as of December 31, 2016.

Century Communities’ principal executive offices are located at 8390 East Crescent Parkway, Suite 650, Greenwood Village, Colorado 80111. Its main telephone number is (303) 770-8300.

UCP, Inc.

UCP is a homebuilder and land developer with expertise in residential land acquisition, development and entitlement, as well as home design, construction and sales. UCP operates in the states of California, Washington, North Carolina, South Carolina and Tennessee. UCP designs, constructs and sells high quality single-family homes through Benchmark Communities, LLC (which we refer to as “Benchmark Communities”), its wholly owned homebuilding subsidiary. Prior to completion of its initial public offering of UCP Class A Common Stock (its “IPO”) on July 23, 2013, UCP operated as a wholly owned subsidiary of PICO Holdings, Inc., a NASDAQ-listed, diversified holding company. Subsequent to UCP’s IPO, PICO holds a majority of the voting power of UCP, Inc. and of the economic interests of UCP, LLC, the subsidiary through which UCP operates its business under the name UCP.

UCP has segmented its operating activities into two geographical regions and currently has homebuilding reportable segments and land development reportable segments in the West and Southeast.

In California, UCP primarily operates in the Central Valley area (Fresno and Madera counties), the Monterey Bay area (Monterey County), the South San Francisco Bay area (Santa Clara and San Benito counties) and in Southern California (Los Angeles, Ventura and Kern counties). In Washington State, it operates in the Puget Sound area (King, Snohomish, Thurston and Kitsap counties). In North Carolina, it operates in the Charlotte and Raleigh areas (Mecklenburg, Iredell, Union, Chatham counties). In South Carolina, UCP operates in the Myrtle Beach area (Horry County). In Tennessee, it operates in the Nashville area (Davidson, Rutherford, Wilson and Sumner counties).

UCP believes that these markets have attractive residential real estate investment characteristics, such as favorable long-term population demographics, consumer demand for single-family housing that often exceeds available supply, large and growing employment bases, and the ability to generate above-average investment returns. It continues to experience significant homebuilding and land development opportunities in its current markets and is evaluating potential expansion opportunities in other markets that it believes have attractive long-term investment characteristics.

UCP actively sources, evaluates and acquires land for residential real estate development and homebuilding. For each of its real estate assets, it periodically analyzes ways to maximize value by either (i) building single-family homes and marketing them for sale under its Benchmark Communities brand or (ii) completing entitlement work and horizontal infrastructure development and selling lots to third-party homebuilders. It performs this analysis using a disciplined analytical process, which UCP believes is a differentiating component of its business strategy.

UCP builds homes through its wholly owned homebuilding subsidiary, Benchmark Communities, LLC. Benchmark Communities operates under the principle that “Everything Matters!” This principle underlies all phases of UCP’s new home sale and construction process including planning, design, construction, marketing, sales and the customer experience. UCP is diversified by product offering, which it believes reduces its exposure to any particular market or customer segment. UCP decides to target specific and identifiable buyer segments by

 



 

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project and geographic market, in part dictated by each particular asset, its location, topography and competitive market positioning, and the amenities of the surrounding area and the community in which it is located.

UCP believes that its sizable inventory of well-located land provides it with a significant opportunity to develop communities and design, construct and sell homes under its Benchmark Communities brand. UCP expects that homebuilding and home sales will constitute its primary means of generating revenue growth for the foreseeable future.

UCP’s principal executive offices are located at 99 Almaden Boulevard, Suite 400, San Jose, California 95113. Its telephone number is (408) 207-9499.

Merger Sub

Casa Acquisition Corp. (which we refer to as “Merger Sub”), a wholly-owned subsidiary of Century Communities, is a Delaware corporation that was formed on April 7, 2017 for the sole purpose of effecting the Merger. In the Merger, UCP will be merged with and into Merger Sub, with Merger Sub surviving the Merger. As a result of the Merger, Merger Sub, together with the legacy business and subsidiaries of UCP, will become direct and indirect wholly-owned subsidiaries of Century Communities.

Merger Sub’s principal executive offices and its telephone number are the same as those of Century Communities.

UCP Special Meeting (See page 51)

General

The UCP special meeting will be held on                 , 2017, at                 a.m., local time, at                 . At the UCP special meeting, UCP stockholders will vote on:

 

    the adoption of the Merger Agreement; and

 

    the adjournment proposal.

The adoption of the Merger Agreement by UCP stockholders is a condition to the obligations of Century Communities and of UCP to complete the Merger.

Record Date

The UCP Board has fixed the close of business on                 , 2017 as the Record Date for determination of the UCP stockholders entitled to vote at the UCP special meeting or any adjournment or postponement thereof. Only UCP stockholders of record on the Record Date are entitled to receive notice of, and to vote at, the UCP special meeting or any adjournment or postponement thereof.

UCP has two classes of voting stock issued and outstanding, the UCP Class A Common Stock and the UCP Class B Common Stock, which generally vote together as a single class on all matters presented to UCP stockholders for their vote or approval. As of the Record Date, there were                 shares of UCP Class A Common Stock outstanding and entitled to vote at the UCP special meeting, held by approximately      holders of record, and there were 100 shares of UCP Class B Common Stock outstanding and entitled to vote at the UCP special meeting, held by one holder of record (PICO). With respect to each matter to be acted upon at the UCP special meeting, each holder of UCP Class A Common Stock is entitled to one vote for each outstanding share of UCP Class A Common Stock held by such holder, and each holder of UCP Class B Common Stock is entitled to,

 



 

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without regard to the number of outstanding shares of UCP Class B Common Stock held by such holder, a number of votes equal to the number of Series A Units of UCP, LLC held by such holder, multiplied by the Exchange Rate. As of the Record Date, the sole holder of record of all outstanding shares of UCP Class B Common Stock is PICO, and PICO holds 10,593,000 Series A Units of UCP, LLC, which are exchangeable for 10,401,722 shares of UCP Class A Common Stock.

Quorum

A quorum of outstanding shares is necessary to take action at the UCP special meeting. The presence in person or by proxy of the holders of UCP Common Stock having a majority of the votes which could be cast by the holders of all outstanding classes of stock entitled to vote at the UCP special meeting will constitute a quorum at the UCP special meeting. Abstentions and broker non-votes will be counted as present in determining the existence of a quorum. However shares held by a beneficial owner in “street name” who does not give the nominee or other intermediary that holds such shares instructions on how to vote such shares on any proposal to be voted on at the UCP special meeting will not be deemed to be in attendance at the meeting or counted for purposes of determining whether a quorum has been achieved.

Required Vote

The required number of votes to approve the matters to be voted upon at the UCP special meeting depends on the particular item to be voted upon as set out below:

 

Item

  

Vote Necessary for Approval*

Proposal I

   Adoption of the Merger Agreement    Approval requires the affirmative vote, in person or by proxy, of holders of a majority of the voting power of the outstanding shares of UCP Class A Common Stock and UCP Class B Common Stock, voting together as a single class.

Proposal II

   Adjournment of UCP Special Meeting (if Necessary or Appropriate)    Approval requires the affirmative vote, in person or by proxy, of holders of a majority of the votes which could be cast by the holders of all classes of stock entitled to vote on such question which are present in person or by proxy at the meeting.

 

* Under the rules of the NYSE, if you hold your shares of UCP Common Stock in street name, your nominee or intermediary may not vote your shares without instructions from you. If you do not provide voting instructions on any Proposal, your shares will not be deemed in attendance at the UCP special meeting and will not be voted. If you provide voting instructions on one Proposal but not the other Proposal, a broker non-vote will occur with respect to whichever Proposal you did not provide voting instructions for. Abstentions will have the same effect as a vote against the applicable Proposal. Shares deemed not in attendance at the meeting, whether due to a record holder’s failure to vote in person or by proxy or a “street name” holder’s failure to provide any voting instructions to such holder’s nominee or intermediary, and broker non-votes will have the same effect as a vote against Proposal I but will have no effect on Proposal II.

Share Ownership of and Voting by UCP Directors and Executive Officers

At the Record Date, UCP’s directors and executive officers and their affiliates (other than PICO, UCP’s majority stockholder) beneficially owned and had the right to vote at the UCP special meeting an aggregate of             shares of UCP Class A Common Stock and no shares of UCP Class B Common Stock, which represents     % of the voting power of the outstanding shares of UCP Common Stock entitled to vote at the UCP special meeting.

 



 

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Two members of the UCP Board, Eric H. Speron and Maxim C.W. Webb, are members of the board of directors of PICO (and Mr. Webb is also the President and Chief Executive Officer of PICO), and may be deemed to share voting power and investment control over the shares of UCP Class B Common Stock owned by PICO. Messrs. Speron and Webb disclaim beneficial ownership of the shares of UCP Class B Common Stock owned by PICO except to the extent of any pecuniary interest therein. The 100 shares of UCP Class B Common Stock owned by PICO are entitled to approximately 57% of the voting power of the outstanding shares of UCP Common Stock entitled to vote at the UCP special meeting.

It is expected that UCP’s directors and executive officers and PICO will vote their respective shares FOR the adoption of the Merger Agreement and FOR the approval of the adjournment proposal. For more information regarding PICO’s obligations to vote its shares of UCP capital stock pursuant to the Voting Agreement, see “The Voting Agreement” beginning on page 120 of this proxy statement/prospectus.

The Merger Agreement and the Merger

In the Merger, UCP will be merged with and into Merger Sub, with Merger Sub being the surviving corporation in the Merger. As a result of the Merger, Merger Sub, together with the legacy business and subsidiaries of UCP, will become direct and indirect wholly-owned subsidiaries of Century Communities.

The Merger will not be completed without the adoption of the Merger Agreement by UCP stockholders.

A copy of the Merger Agreement is attached as Annex A to this proxy statement/prospectus. You are urged to read the Merger Agreement in its entirety because it is the legal document that governs the Merger. For more information on the Merger and the Merger Agreement, see “Proposal I: Adoption of The Merger Agreement” and “The Merger Agreement” beginning on pages 57 and 103, respectively, of this proxy statement/prospectus.

As of the date of this proxy statement/prospectus, it is not possible to accurately estimate the closing date for the Merger because the Merger is subject to the satisfaction (or, to the extent permitted by applicable law, waiver) of the conditions to Century Communities’ and UCP’s obligations to complete the Merger, some of which are not within the control of such parties; however, Century Communities and UCP currently expect the Merger to close during the third quarter of 2017. No assurance can be given as to when, or if, the Merger will be completed.

The Voting Agreement (See page 120)

On April 10, 2017, Century Communities, Merger Sub, PICO, for the limited purposes set forth therein, UCP, and for the limited purposes set forth therein, UCP, LLC, entered into a Voting Support and Transfer Restriction Agreement (which we refer to as the “Voting Agreement”).

Pursuant to the Voting Agreement, PICO has agreed (i) to appear and be present at all meetings of UCP stockholders and otherwise cause all shares of UCP held by PICO to be counted for purposes of determining a quorum, and (ii) to (A) affirmatively vote and cause to be voted all of its shares of UCP Common Stock (or, following certain changes in the recommendation of the UCP Board, a number of shares of UCP Common Stock equal to 28% of the aggregate voting power of all outstanding shares of UCP Common Stock) in favor of the adoption of the Merger Agreement by UCP stockholders and approval of the Merger and the other transactions contemplated by the Merger Agreement; and (B) vote and cause to be voted all shares of UCP Common Stock held by PICO against the adoption or approval of (1) any Company Takeover Proposal (as defined in the Merger Agreement) and the transactions contemplated thereby, (2) any action or agreement that PICO knows, or would reasonably be expected to know, would result in (x) a breach or violation of, or non-compliance with, any

 



 

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representation, warranty, covenant, agreement, or other obligation of UCP or any subsidiary or affiliate of UCP set forth in the Merger Agreement, or (y) the failure of any of the conditions to the obligations of Century Communities or Merger Sub to consummate the Merger and the other transactions contemplated by the Merger Agreement set forth in Sections 7.01 and 7.02 of the Merger Agreement, (3) any change in the size, term in office, or composition of the board of directors of UCP, and (4) any agreement, any amendment or restatement of the UCP Charter or the UCP Bylaws, or any other action (or failure to act) that is intended or would reasonably be expected to prevent, interfere with, or materially impair or delay, the consummation of the Merger or any of the other transactions contemplated by the Merger Agreement in accordance with their terms.

The Voting Agreement terminates automatically on the first to occur of (i) the termination of the Merger Agreement in accordance with its terms, and (ii) the effective time of the Merger.

See “The Voting Agreement” beginning on page 120 of this proxy statement/prospectus.

Merger Consideration (See page 104)

At the effective time of the Merger, each share of UCP Class A Common Stock (other than dissenters’ shares or treasury shares held by UCP and any shares of UCP Class A Common Stock owned by any UCP subsidiary, Century Communities or Century Communities subsidiary) will be converted into the right to receive and become exchangeable for the Merger Consideration, consisting of (i) $5.32 in cash, without any interest thereon, and (ii) 0.2309 of a duly authorized, fully paid and non-assessable share of Century Communities Common Stock. No fractional shares will be issued in the Merger, and UCP stockholders will receive cash in lieu of any fractional shares.

Based on the closing sale price of a share of Century Communities Common Stock on NYSE on April 10, 2017, the last trading day before the public announcement of the Merger Agreement, the Merger Consideration represented approximately $11.35 in value per share of UCP Class A Common Stock. Based on the closing sale price of a share of Century Communities Common Stock on NYSE on                 , 2017, the most recent practicable trading day prior to the date of this proxy statement/prospectus, the Merger Consideration represented approximately $         in value for each share of UCP Class A Common Stock.

Because Century Communities will, in addition to the payment of $5.32 of cash consideration, issue a fixed number of shares (0.2309) of Century Communities Common Stock in exchange for each share of UCP Class A Common Stock and because there will be no adjustment made to such fixed number of shares, the aggregate value of the Merger Consideration will depend on the then-current NYSE market price of shares of Century Communities Common Stock at the effective time of the Merger. As a result, the value of the Merger Consideration could be greater than, less than, or the same as, the value of the Merger Consideration on the date of this proxy statement/prospectus or at the time of the UCP special meeting.

At the effective time of the Merger, each share of UCP Class B Common Stock outstanding will be canceled for no consideration. Although PICO currently holds and will be entitled to vote at the UCP special meeting 100 shares of UCP Class B Common Stock, concurrently with the execution and delivery of the Merger Agreement, PICO exercised its right under the existing Exchange Agreement, dated as of July 23, 2013 (which we refer to as the “Exchange Agreement”), by and among UCP, UCP, LLC and PICO, to exchange all Series A Units of UCP, LLC held by PICO for shares of UCP Class A Common Stock, effective immediately prior to the effective time of the Merger. As a result of this exchange, the completion of which is also a condition to Century Communities’ and UCP’s obligations to complete the Merger as more fully described in this proxy statement/prospectus and in the Merger Agreement, PICO will receive the same Merger Consideration per share of UCP Class A Common Stock as every other UCP stockholder.

 



 

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UCP’s Reasons for the Merger; Recommendation of the UCP Board of Directors (See page 70)

In evaluating the Merger and other transactions contemplated by the Merger Agreement, the UCP Board consulted with UCP senior management and UCP’s outside legal counsel and financial advisor. After consideration, all of the members of the UCP Board who attended and participated in the April 10, 2017 meeting of the UCP Board at which the Merger Agreement was being considered and voted on, determined that the Merger Agreement and the other transactions contemplated by the Merger Agreement, including the Merger, are fair to, and in the best interests of, UCP and its stockholders, and adopted, approved and declared advisable the Merger Agreement and the other transactions contemplated by the Merger Agreement, including the proposed Merger. For more information regarding the factors considered by the UCP Board in reaching its decision to approve the Merger Agreement and the Merger contemplated by the Merger Agreement, see “Proposal I: Adoption of the Merger Agreement—UCP’s Reasons for the Merger; Recommendation of the UCP Board of Directors” beginning on page 70 of this proxy statement/prospectus.

The UCP Board recommends that UCP stockholders vote FOR the adoption of the Merger Agreement, and FOR the adjournment proposal.

Opinion of UCP’s Financial Advisor (See page 77)

In connection with the proposed Merger, UCP’s financial advisor, Citigroup Global Markets Inc., referred to as Citi, delivered a written opinion, dated April 10, 2017, to the UCP Board as to the fairness, from a financial point of view and as of the date of the opinion, of the Merger Consideration to be received by holders of UCP Class A Common Stock (other than PICO and its affiliates) pursuant to the Merger Agreement. The full text of Citi’s written opinion, dated April 10, 2017, to the UCP Board, which describes the assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken, is attached as Annex C to this proxy statement/prospectus and is incorporated herein by reference. The description of Citi’s opinion set forth in this proxy statement/prospectus is qualified in its entirety by reference to the full text of Citi’s opinion. Citi’s opinion was provided for the information of the UCP Board (in its capacity as such) in connection with its evaluation of the Merger Consideration from a financial point of view and did not address any other terms, aspects or implications of the Merger. Citi expressed no view as to, and its opinion did not address, the underlying business decision of UCP to effect or enter into the Merger, the relative merits of the Merger as compared to any alternative business strategies that might exist for UCP or the effect of any other transaction which UCP might engage in or consider. Citi’s opinion is not intended to be and does not constitute a recommendation to any stockholder as to how such stockholder should vote or act on any matters relating to the proposed Merger or otherwise.

Interests of Certain UCP Directors and Officers in the Merger (See page 92)

In considering the recommendation of the UCP Board that UCP stockholders vote FOR the adoption of the Merger Agreement and FOR the adjournment proposal, UCP stockholders should be aware and take into account the fact that certain UCP directors and executive officers have interests in the Merger or the other transactions contemplated by the Merger Agreement that may be different from, or in addition to, the interests of UCP stockholders generally and that may create potential conflicts of interests. Specifically, (i) Mr. Bogue will be entitled to a one-time transaction bonus equal to $1,972,639, paid 60 days after the closing of the Merger, and may be entitled to up to $1.4 million in accelerated vesting of restricted stock units and $530,000 in cash severance if terminated without “cause” or if he resigns for “good reason” following such closing (plus a COBRA subsidy for 12 months following termination), and (ii) Mr. Pirrello, if terminated without “cause” or if he resigns for “good reason” after such closing, may be entitled to up to $953 thousand in accelerated vesting of restricted stock units and $1,126,726 in cash severance (plus a COBRA subsidy for 12 months following termination).

 



 

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The directors and executive officers of UCP will also be entitled to certain indemnification rights under the Merger Agreement.

The UCP Board was aware of and carefully considered these interests, among other matters, in evaluating the terms and structure, and overseeing the negotiation of, the Merger, in approving the Merger Agreement and in recommending that UCP stockholders vote FOR the adoption of the Merger Agreement, and FOR the adjournment proposal. All of the independent and disinterested UCP directors, constituting a majority of the UCP Board, approved the Merger Agreement and made the foregoing recommendations.

For additional information about these interests, see “Proposal I: Adoption of the Merger Agreement—Interests of Certain UCP Directors and Officers in the Merger” beginning on page 92 of this proxy statement/prospectus.

Board of Directors and Management Following the Merger (See page 94)

Upon consummation of the Merger, the board of directors and executive officers of Century Communities are expected to remain unchanged. For information on Century Communities’ current directors and executive officers, please see Century Communities’ proxy statement for its 2017 annual meeting of stockholder filed with the SEC on March  29, 2017. See “Where You Can Find More Information” beginning on page 152.

Treatment of UCP Equity Awards in the Merger (See page 94)

At the effective time of the Merger, each then-outstanding option to purchase shares of UCP Common Stock will automatically be converted into an option to purchase shares of Century Communities Common Stock on the same terms and conditions as were applicable under such UCP option immediately prior to the effective time of the Merger, and each then-outstanding restricted stock unit award with respect to shares of UCP Common Stock will automatically be converted into a restricted stock unit award with respect to shares of Century Communities Common Stock, with the same terms and conditions as were applicable under such UCP restricted stock unit award immediately prior to the effective time of the Merger. However, pursuant to amendments to employment agreements of certain UCP employees that will become effective as of, and are subject to and conditioned upon, the consummation of the Merger, all of the outstanding UCP options, whether vested or unvested, will be canceled for no consideration upon the consummation of the Merger. For additional information see the section entitled “Proposal I: Adoption of the Merger Agreement—Treatment of UCP Equity Awards” beginning on page 94, of this proxy statement/prospectus.

Certain Material U.S. Federal Income Tax Consequences of the Merger (See page 95)

It is a condition to completion of the Merger that Paul, Weiss, tax counsel to UCP, and Greenberg Traurig, tax counsel to Century Communities, each deliver an opinion to both UCP and Century Communities, dated the closing date of the Merger, to the effect that the Merger will qualify for U.S. federal income tax purposes as a “reorganization” within the meaning of Section 368(a) of the Code. Each party may waive the requirement to receive such opinions as a condition to such party’s obligation to complete the Merger. Assuming that the Merger qualifies as a reorganization, a U.S. holder of UCP Class A Common Stock will generally recognize gain, but not loss, if the U.S. holder surrenders its shares of UCP Class A Common Stock in exchange for a combination of Century Communities Common Stock and cash. In such case, that U.S. holder will generally recognize gain equal to the lesser of (1) the cash received (other than cash in lieu of any fractional share) and (2) the excess of the sum of the cash received (other than cash in lieu of any fractional share) and the fair market value (on the date of the Merger) of the Century Communities Common Stock received (including any fractional share for which cash was paid) over such U.S. holder’s adjusted tax basis in the shares of UCP Class A Common Stock surrendered by such U.S. holder in the Merger. In addition, such U.S. holder will generally recognize gain or loss on the receipt of cash in lieu of any fractional share.

 



 

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The tax opinions regarding the Merger will not address any state, local or foreign tax consequences of the Merger. The opinions will be based on certain assumptions and representations as to factual matters from Century Communities and UCP, as well as certain covenants and undertakings by Century Communities and UCP, substantially in the forms of the letters set forth in the disclosure schedules to the Merger Agreement. If any of the assumptions, representations, covenants or undertakings is incorrect, incomplete, inaccurate or is violated prior to the effective time of the Merger, one or both of the opinions may not be delivered and, if delivered, the conclusions reached by counsel in their opinions cannot be relied upon. In such case, the tax consequences of the Merger could differ from those described in this proxy statement/prospectus. Neither Century Communities nor UCP is currently aware of, nor expects there to be, any facts or circumstances that would cause any of the assumptions, representations, covenants or undertakings set forth in the forms of the letters set forth in the disclosure schedules to the Merger Agreement to be incorrect, incomplete, inaccurate or violated.

An opinion of counsel represents such counsel’s best legal judgment but is not binding on 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 would not sustain such a challenge.

You are urged to consult your own tax advisor regarding the particular tax consequences to you of the Merger.

Accounting Treatment of the Merger (See page 99)

The Merger will be accounted for in accordance with GAAP. GAAP requires the Merger to be accounted for using the acquisition method pursuant to which Century Communities has been determined to be the acquirer for accounting purposes. As required by the acquisition method, Century Communities will record UCP’s tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values at the acquisition date. The excess of consideration transferred (i.e. purchase price) over the fair value of net assets acquired will be recognized as goodwill. Goodwill is not amortized, but is tested for impairment at least annually or more frequently if circumstances indicate potential impairment. The operating results of UCP will be reported as part of the combined company beginning on the closing date of the Merger. The final valuation of the tangible and identifiable intangible assets acquired and liabilities assumed has not yet been completed. The completion of the valuation upon consummation of the Merger could result in significantly different amortization expenses and balance sheet classifications than those presented in Century Communities’ unaudited pro forma condensed combined financial information included in this proxy statement/prospectus.

Regulatory Approvals Required to Complete the Merger (See page 99)

Century Communities and UCP 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 “Proposal I: Adoption of the Merger Agreement—Regulatory Approvals Required to Complete the Merger” beginning on page 99 of this proxy statement/prospectus.

Litigation Relating to the Merger (See page 99)

A putative class action lawsuit (captioned: Joseph Tola v. UCP, Inc., Michael C. Cortney, Dustin L. Bogue, Eric H. Speron, Peter H. Lori, Kathleen R. Wade, Maxim C.W. Webb, Century Communities, Inc. and Casa Acquisition Corp., Case No. 5:17-cv-02713, United States District Court, Northern District of California) was filed on May 10, 2017, purportedly on behalf of UCP stockholders, against UCP and the individually named directors, all of whom are the directors of UCP. Century Communities and Merger Sub are also named as defendants. The complaint alleges claims under Section 14(a) of the Exchange Act, and Rule 14a-9 promulgated thereunder, as well as claims under Section 20(a) of the Exchange Act. Plaintiff alleges that this proxy statement/prospectus omits to include certain information and seeks to enjoin the Merger, rescission in the event the Merger is consummated or an award of rescissory damages, and an award of plaintiff’s attorney’s fees and costs of the litigation.

 



 

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Century Communities and UCP are disclosing in this proxy statement/prospectus certain additional information (which we refer to as the “Supplemental Disclosures”) in response to plaintiff’s complaint and solely for the purpose of rendering moot the allegations contained therein. The defendants deny all of the allegations set forth by plaintiff in the complaint and deny any alleged violations of law. The Supplemental Disclosures should be read in conjunction with this proxy statement/prospectus, which we urge you to read in its entirety. With respect to plaintiff’s complaint, the defendants deny that this proxy statement/prospectus contained, prior to the amendment containing the Supplemental Disclosures, any material misstatements or omissions, and deny that any further supplemental disclosure was required to be made under any applicable rule, statute, regulation or law. The defendants deny and have not admitted wrongdoing of any kind, including, but not limited to, alleged inadequacies in any disclosure contained in this proxy statement/prospectus, the materiality of any disclosure that the plaintiff alleges should have been made in this proxy statement/prospectus, or any violation of any federal or state law. The defendants believe that this proxy statement/prospectus disclosed, prior to the amendment containing the Supplemental Disclosures, all material information necessary for holders of UCP Common Stock to make a fully informed voting decision, and the defendants deny that the Supplemental Disclosures are material or are otherwise required by any federal or state law.

Plaintiff and defendants, through their respective counsel, entered into a memorandum of understanding, dated June 21, 2017, pursuant to which, among other things, plaintiff has agreed to voluntarily withdraw and dismiss with prejudice his individual claims in the above-referenced lawsuit and to terminate all asserted claims therein in connection with the Supplemental Disclosures made in this proxy statement/prospectus.

Completion of the Merger is Subject to Certain Conditions (See page 114)

As more fully described in this proxy statement/prospectus and in the Merger Agreement, the obligations of Century Communities and UCP to complete the Merger are subject to the satisfaction of a number of conditions, including the following:

 

    the adoption of the Merger Agreement by UCP stockholders at the UCP special meeting (or at any adjournment or postponement thereof);

 

    the effectiveness of the registration statement of which this proxy statement/prospectus forms a part and the absence of a stop order in respect thereof or proceedings initiated or threatened by the SEC for that purpose;

 

    approval for listing on the NYSE of the shares of Century Communities Common Stock to be issued to UCP stockholders pursuant to the Merger Agreement;

 

    the Series A Units of UCP, LLC held by PICO shall have been exchanged for shares of UCP Class A Common Stock and UCP, LLC shall be a wholly-owned subsidiary of UCP;

 

    the absence of any laws, order, judgments and injunctions that restrain, enjoin or otherwise prohibit consummation of the Merger;

 

    subject to certain exceptions, the accuracy of the respective representations and warranties of Century Communities and UCP, and compliance by Century Communities and UCP with their respective covenants, contained in the Merger Agreement;

 

    the absence of a material adverse effect relating to Century Communities or UCP; and

 

    the receipt of a tax opinion from each party’s tax counsel to the effect that the Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code.

For more information, see “The Merger Agreement—Conditions to Completion of the Merger” beginning on page 114 of this proxy statement/prospectus.

 



 

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No Solicitation of Alternative Proposals (See page 109)

The Merger Agreement precludes UCP from soliciting or engaging in discussions or negotiations with a third party with respect to any proposal for a competing transaction, including the acquisition of a significant interest in UCP’s capital stock or assets. However, if UCP receives an unsolicited proposal from a third party for a competing transaction that the UCP Board, among other things, determines in good faith (after consultation with UCP’s outside legal counsel and financial advisor) (i) constitutes or would reasonably be expected to lead to a proposal that is superior to the Merger, and (ii) did not result from a breach of the non-solicitation obligations set forth in the Merger Agreement, then UCP may furnish non-public information to and enter into discussions with that third party and its representatives and financing sources about such competing transaction after obtaining from such third party an executed confidentiality agreement. For more information, see “The Merger Agreement—No Solicitation of Alternative Proposals” beginning on page 109 of this proxy statement/prospectus.

Termination of the Merger Agreement (See page 116)

The Merger Agreement may be terminated and the Merger abandoned at any time before the effective time of the Merger in the following circumstances:

 

    by the mutual written consent of Century Communities, Merger Sub and UCP;

 

    by either Century Communities or UCP if:

 

    the Merger is not consummated by the Outside Date;

 

    any governmental entity has issued a final and non-appealable judgment or order permanently prohibiting the consummation of the Merger;

 

    any condition to the obligations of such party to complete the Merger becomes incapable of satisfaction before the Outside Date;

 

    UCP stockholders fail to adopt the Merger Agreement at the UCP special meeting (or at any adjournment or postponement thereof); or

 

    the other party has breached or failed to perform in any material respect any of its representations, warranties, covenants or other agreements, which breach or failure to perform (1) would give rise to the failure of any closing condition relating to the accuracy of such other party’s representations and warranties or such other party’s compliance with covenants would fail to be satisfied, and (2) such inaccuracy or breach is either incapable of being cured or is not cured within 30 days after receiving written notice thereof;

 

    by Century Communities, before the adoption of the Merger Agreement by UCP stockholders, if the UCP Board changes its recommendation to UCP stockholders to vote in favor of the adoption of the Merger Agreement; or

 

    by UCP, before the adoption of the Merger Agreement by UCP stockholders, in order to enter into a binding agreement providing for a superior company proposal, in accordance with the terms and provisions of the Merger Agreement.

Under the Merger Agreement, UCP is not permitted to terminate the Merger Agreement if the UCP Board changes its recommendation to UCP stockholders solely in response to an “Intervening Event” (as defined in the Merger Agreement). For more information, see “The Merger Agreement—Termination of the Merger Agreement” beginning on page 116 of this proxy statement/prospectus.

Fees and Expenses and Termination Fees (See page 117)

Generally, each party is required to pay all fees and expenses incurred by it in connection with the Merger. However, the Merger Agreement provides that, upon termination of the Merger Agreement under certain

 



 

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circumstances, including termination by UCP to enter into a definitive agreement for a proposal that constitutes a superior proposal (as further described in the Merger Agreement), UCP will be required to pay Century Communities a cash termination fee of $7,050,000.

For more information, see “The Merger Agreement—Fees and Expenses and Termination Fees” beginning on page 117 of this proxy statement/prospectus.

Listing of Shares of Century Communities Common Stock and Delisting and Deregistration of UCP Class A Common Stock (See page 101)

Under the terms of the Merger Agreement, Century Communities is required to use all reasonable efforts to cause the shares of Century Communities Common Stock to be issued in the Merger to be approved for listing on the NYSE, prior to the closing of the Merger. Accordingly, application will be made to have such shares approved for listing on the NYSE, where shares of Century Communities Common Stock are currently listed for trading under the ticker symbol “CCS.”

If the Merger is completed, there will no longer be any publicly held shares of UCP Class A Common Stock. Accordingly, UCP Class A Common Stock will no longer be listed on the NYSE and will be deregistered under the Exchange Act.

Comparison of Stockholder Rights (See page 138)

UCP stockholders will have different rights once they become Century Communities stockholders due to differences between the organizational documents of UCP and Century Communities. See “Comparison of Stockholder Rights” beginning on page 138 of this proxy statement/prospectus.

Appraisal Rights (See page 143)

Pursuant to Section 262 of the DGCL, UCP stockholders who do not vote in favor of adoption of the Merger Agreement, who continuously hold their shares of UCP Class A Common Stock through the effective time of the Merger and who otherwise comply with the applicable requirements of Section 262 of the DGCL have the right to seek appraisal of the fair value of their shares of UCP Common Stock, as determined by the Delaware Court of Chancery, if the Merger is completed. The “fair value” of shares of UCP Common Stock as determined by the Delaware Court of Chancery could be greater than, the same as, or less than the value of the Merger Consideration that UCP stockholders would otherwise be entitled to receive under the terms of the Merger Agreement.

The right to seek appraisal will be lost if a UCP stockholder votes FOR adoption of the Merger Agreement. However, abstaining or voting against adoption of the Merger Agreement is not in itself sufficient to perfect appraisal rights because additional actions must also be taken to perfect such rights.

UCP stockholders who wish to exercise the right to seek an appraisal of their shares must so advise UCP by submitting a written demand for appraisal prior to the taking of the vote on the Merger Agreement at the UCP special meeting, and must otherwise follow the procedures prescribed by Section 262 of the DGCL. A person having a beneficial interest in shares of UCP Class A Common Stock held of record in the name of another person, such as a nominee or intermediary, must act promptly to cause the record holder to follow the steps required by Section 262 of the DGCL and in a timely manner to perfect appraisal rights. In view of the complexity of Section 262 of the DGCL, UCP stockholders that may wish to pursue appraisal rights are urged to consult their legal and financial advisors. In addition, under Section 262 of the DGCL, the Delaware Court of Chancery will dismiss any appraisal proceedings as to all stockholders who have perfected their appraisal rights unless (i) the total number of shares entitled to appraisal exceeds 1% of the outstanding shares of UCP Class A Common Stock, or (ii) the value of the Merger Consideration provided in the Merger Agreement for the total number of shares of UCP Class A Common Stock entitled to appraisal exceeds $1 million. See “Appraisal Rights” beginning on page 143 of this proxy statement/prospectus.

 



 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF CENTURY COMMUNITIES

The following table presents selected historical consolidated financial data of Century Communities. The selected historical consolidated financial data as of December 31, 2016 and 2015, and for each of the years in the three-year period ended December 31, 2016, are derived from Century Communities’ audited consolidated financial statements and accompanying notes, which are contained in Century Communities’ Annual Report on Form 10-K for the fiscal year ended December 31, 2016, which is incorporated by reference into this proxy statement/prospectus. The selected historical consolidated financial data as of December 31, 2014, 2013 and 2012, and for the years ended December 31, 2013 and 2012, are derived from Century Communities’ audited consolidated financial statements and accompanying notes for such years, which have previously been filed with the SEC but which are not incorporated by reference into this proxy statement/prospectus. The selected historical unaudited condensed consolidated financial data as of March 31, 2017 and 2016, and for the three months ended March 31, 2017 and 2016, are derived from Century Communities’ unaudited condensed consolidated financial statements and accompanying notes, which are contained in Century Communities’ Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2017, which is incorporated by reference into this proxy statement/prospectus.

The information set forth below is only a summary. You should read the following information together with Century Communities’ audited consolidated financial statements and accompanying notes and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Century Communities’ Annual Report on Form 10-K for the fiscal year ended December 31, 2016, and with Century Communities’ unaudited condensed consolidated financial statements and accompanying notes and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Century Communities’ Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2017, which are incorporated by reference into this proxy statement/prospectus, and in Century Communities’ other reports filed with the SEC. For more information, see “Where You Can Find More Information” beginning on page 152 of this proxy statement/prospectus.

 

    Three Months Ended
March 31,
    Year Ended December 31,  
(in thousands, except per share amounts)   2017     2016     2016     2015     2014     2013     2012  

Consolidated Statements of Operations:

             

Revenue

             

Homebuilding revenues

             

Home sales revenues

  $ 226,420     $ 181,081     $ 978,733     $ 725,437     $ 351,823     $ 171,133     $ 96,030  

Land sales and other revenues

    1,896       3,015       15,707       9,052       10,569       —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    228,316       184,096       994,440       734,489       362,392       171,133       96,030  

Financial services revenue

    —         —         —         —         —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Revenue

    228,316       184,096       994,440       734,489       362,392       171,133       96,030  

Home Building Cost of Revenue

             

Cost of homes sales revenues

    (182,324     (144,353     (786,127     (579,203     (276,386     (129,651     (75,448

Cost of land sales and other revenues

    (1,144     (2,542     (14,217     (8,432     (8,109     —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    (183,468     (146,895     (800,344     (587,635     (284,495     (129,651     (75,448

Financial services costs

    (754     —         —         —         —         —         —    

Selling, general, and administrative

    (33,212     (25,185     (122,224     (87,840     (46,795     (23,622     (13,496

Equity in income of unconsolidated subsidiaries

    1,255       —         —         —         —         —         —    

Other income (expense)

    (86     413       1,277       1,291       (143     213       353  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before tax expense

    12,051       12,429       73,149       60,305       30,959       18,073       7,439  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income tax expense

    (3,252     (4,446     (23,609     (20,415     (10,937     (5,642     —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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    Three Months Ended
March 31,
    Year Ended December 31,  
(in thousands, except per share amounts)   2017     2016     2016     2015     2014     2013     2012  

Consolidated net income of Century Communities, Inc.

    8,799       7,983       49,540       39,890       20,022       12,431       7,439  

Net income attributable to non-controlling interests

    —         —         —         —         —         52       1,301  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to common stockholders

  $ 8,799     $ 7,983     $ 49,540     $ 39,890     $ 20,022     $ 12,379     $ 6,138  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic earnings per share

  $ 0.40     $ 0.38     $ 2.34     $ 1.88     $ 1.03     $ 0.95        

Diluted earnings per share

  $ 0.40     $ 0.38     $ 2.33     $ 1.88     $ 1.03     $ 0.95        

Balance Sheet Data (end of period):

             

Cash and cash equivalents

  $ 23,465     $ 11,437     $ 29,450     $ 29,287     $ 33,462     $ 109,998     $ 7,897  

Inventories

  $ 884,072     $ 867,357   $ 857,885     $ 810,137     $ 556,323     $ 184,072     $ 77,305  

Total assets

  $ 1,026,026     $ 957,621     $ 1,007,528     $ 917,741     $ 670,616     $ 312,639     $ 90,673  

Total debt

  $ 447,948     $ 415,051   $ 454,088     $ 390,243     $ 224,247     $ 1,500     $ 33,206  

Total liabilities

  $ 529,561     $ 541,092     $ 533,892     $ 508,262     $ 305,411     $ 41,083     $ 66,112  

Equity

  $ 496,465     $ 416,529   $ 473,636     $ 409,479     $ 365,205     $ 271,556     $ 24,561  

Other Operating Information (dollars in thousands):

             

Number of homes delivered

    608       539       2,825       2,401       1,046       448       336  

Average sales price of homes delivered

  $ 372.4     $ 336.0     $ 346.5     $ 302.1     $ 336.4     $ 382.0     $ 285.8  

Homebuilding gross margin percentage

    19.5     20.3     19.7     20.2     21.4     24.2     21.4

Cancellation rates

    15     22     20     21     18     20     17

Backlog at end of period, number of homes

    1,098       969       749       714       772       222       148  

Backlog at end of period, aggregate sales value

  $ 436,003     $ 361,298     $ 302,823     $ 271,138     $ 246,327     $ 103,250     $ 51,562  

Average sales price of homes in backlog

  $ 397.1     $ 372.9     $ 404.3     $ 379.7     $ 319.1     $ 465.1     $ 348.4  

Net new home contracts

    957       794       2,860       2,356       1,042       406       415  

Selling communities at period end

    88       87       89       88       83       23       13  

Total owned and controlled lot inventory

    18,854       13,188       18,296       13,160       11,463       8,341       3,072  

 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA OF UCP

The following table presents selected historical consolidated financial data of UCP. The selected historical consolidated financial data as of December 31, 2016 and 2015, and for each of the years in the three-year period ended December 31, 2016, are derived from UCP’s audited consolidated financial statements and accompanying notes, which are contained in UCP’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, which is incorporated by reference into this proxy statement/prospectus. The selected historical consolidated financial data as of December 31, 2014 and 2013 and 2012, and for the years ended December 31, 2013 and 2012, are derived from UCP’s audited consolidated financial statements and accompanying notes for such years, which have previously been filed with the SEC but which are not incorporated by reference into this proxy statement/prospectus. The selected historical unaudited condensed consolidated financial data as of March 31, 2017 and 2016, and for the three months ended March 31, 2017 and 2016, are derived from UCP’s unaudited condensed consolidated financial statements and accompanying notes, which are contained in UCP’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2017, which is incorporated by reference into this proxy statement/prospectus.

The information set forth below is only a summary. You should read the following information together with UCP’s audited consolidated financial statements and accompanying notes and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in UCP’s Annual Report on Form 10-K for the year ended December 31, 2016, and with UCP’s unaudited condensed consolidated financial statements and accompanying notes and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in UCP’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2017, which are incorporated by reference into this proxy statement/prospectus, and in UCP’s other reports filed with the SEC. For more information, see “Where You Can Find More Information” beginning on page 152 of this proxy statement/prospectus.

UCP completed its initial public offering of UCP Class A Common Stock (its “IPO”) on July 23, 2013. Due to the timing of UCP’s IPO, presented herein are certain combined consolidated historical financial data for UCP, LLC for periods prior to UCP’s IPO. As such, the information for the year ended December 31, 2012 reflects the financial condition and results of operations of UCP’s predecessor, and the information for the year ended December 31, 2013 reflects the financial condition and results of operations of UCP’s predecessor for the portion of the year preceding UCP’s IPO and of UCP for the remainder of 2013.

 

    Three Months
Ended March 31,
    Year Ended December 31,  

(In thousands, except per share data)

  2017     2016     2016     2015     2014     2013     2012  

Statement of Operations Data:

             

Home sales

  $ 94,002     $ 68,225     $ 343,919     $ 252,597     $ 155,417     $ 72,511     $ 14,060  

Cost of home sales

    76,653       56,206       280,614       206,747       129,577       57,500       9,832  

Impairment on real estate

    102       —         458       923       —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Homebuilding gross profit (a)

    17,247       12,019       62,847       44,927       25,840       15,011       4,228  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Land sales

    496       —         5,449       21,134       32,513       20,215       44,066  

Cost of land sales

    475       461       4,637       15,291       25,466       13,820       32,876  

Impairment on real estate

    —         —         2,131       —         —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Land sales gross (loss) profit (a)

    21       (461     (1,319     5,843       7,047       6,395       11,190  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other revenue

    —         —         —         5,060       3,253       —         —    

Cost of sales—other revenue

    —         —         —         4,363       2,828       —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other revenue gross profit

    —         —         —         697       425       —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total gross profit

    17,268       11,558       61,528       51,467       33,312       21,406       15,418  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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    Three Months
Ended March 31,
    Year Ended December 31,  

(In thousands, except per share data)

  2017     2016     2016     2015     2014     2013     2012  

Sales and marketing

    5,149       4,076       19,257       18,943       13,748       6,647       2,875  

General and administrative

    8,502       7,275       29,161       26,878       27,406       19,368       10,103  

Goodwill impairment

    —         —         4,223       —         —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

    13,651       11,351       52,641       45,821       41,154       26,015       12,978  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total cost and expenses

    90,881       68,018       340,481       273,145       199,025       97,335       55,686  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations

    3,617       207       8,887       5,646       (7,842     (4,609     2,440  

Other income

    460       28       276       206       121       322       578  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) before income taxes

  $ 4,077     $ 235     $ 9,163     $ 5,852     $ (7,721   $ (4,287   $ 3,018  

Benefit (provision) for income taxes

    (621     (5     5,285       (69     —         —         —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

  $ 3,456     $ 230     $ 14,448     $ 5,783     $ (7,721   $ (4,287   $ 3,018  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to noncontrolling interest

  $ 2,310     $ 134     $ 5,210     $ 3,412     $ (2,728   $ (2,346   $ 3,018  

Net income (loss) attributable to UCP, Inc.

  $ 1,146     $ 96     $ 9,238     $ 2,371     $ (4,993   $ (1,941     —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) per share

             

Basic

  $ 0.14     $ 0.01     $ 1.16     $ 0.30     $ (0.63   $ (0.25     —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

  $ 0.14     $ 0.01     $ 1.15     $ 0.30     $ (0.63   $ (0.25     —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(a)  Homebuilding and land sales gross profit includes the impairment on real estate.

 

     Three Months Ended
March 31,
    Year Ended December 31,  

(In thousands, except unit data)

   2017     2016     2016     2015     2014     2013     2012  

Operating Data-Owned Projects:

              

Net new home orders

     270       225       933       860       473       205       61  

New homes delivered

     226       167       820       701       432       196       41  

Average sales price of homes delivered (in thousands)

   $ 416     $ 409     $ 419     $ 360     $ 360     $ 370     $ 343  

Cancellation rate

     11.5     13.5     12.1     10.0     8.0     12.8     12.9

Average active selling communities (1)

     27       28       28       28       16       7       3  

Active selling communities at end of period (2)

     26       29       28       28       21       9       4  

Backlog at end of period, number of homes

     406       307       362       249       91       35       26  

Backlog at end of period, aggregate sales value (in thousands)

   $ 176,596     $ 136,220     $ 149,639     $ 108,773     $ 32,499     $ 17,121     $ 9,182  

Average sales price of backlog (in thousands)

   $ 435     $ 444     $ 413     $ 437     $ 357     $ 489     $ 353  

 

(1)  “Average active selling communities during the period” refers to the average number of open selling communities at the end of each month during the period.

 

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(2)  “Active selling communities” consists of those communities where UCP has more than 15 or more homes remaining to deliver.

 

(In thousands, except per share data)    As of March 31,      As of December 31,  

FINANCIAL CONDITION

   2017      2016      2016      2015      2014      2013      2012  

Cash and cash equivalents

   $ 34,270      $ 29,769      $ 40,931      $ 39,829      $ 42,033      $ 87,503      $ 10,324  

Real estate inventories

     389,379        371,545        373,207        360,989        321,693        176,848        125,367  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total assets (a)

     442,118        414,155        434,106        414,697        375,139        267,320        137,534  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Debt (a)(b)

     161,551        158,584        160,994        155,966        133,139        30,950        29,112  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities (a)

     213,608        196,377        207,220        197,289        163,872        49,604        35,219  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total equity

   $ 228,510      $ 217,778      $ 226,886      $ 217,408      $ 211,267      $ 217,716      $ 102,315  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total UCP, Inc. stockholders’ equity

   $ 102,184      $ 90,356      $ 100,628      $ 90,200      $ 87,255      $ 91,254     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Number of shares issued at period end (in 000s)

     8,105        8,026        8,043        8,014        7,922        7,750     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

Book value per share (c)

   $ 12.61      $ 11.27      $ 12.51      $ 11.26      $ 11.01      $ 11.77     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

(a)  As part of UCP’s adoption of Accounting Standards Update (which we refer to as “ASU 2015-03”), approximately $1.5 million and $2.4 million of unamortized debt issuance costs that were included in the prepaid expenses category of other assets as of December 31, 2015 and 2014 have been reclassified from other assets to notes payable and senior notes in the consolidated balance sheets. ASU 2015-03 did not have an impact on the consolidated balance sheets as of December 31, 2013 and 2012.
(b)  Debt comprises of the following:

 

     As of March 31,      As of December 31,  

(In thousands)

   2017      2016      2016      2015      2014      2013      2012  

Acquisition (a)

   $ 17,155      $ 19,505      $ 19,061      $ 26,102      $ 20,254      $ 11,046        12,274  

Development (a)

     —          2,128        —          4,701        544        6,018        12,906  

Construction (a)

     69,846        63,257        67,597        51,683        39,711        13,886        3,932  

Bonds (a)

     74,550        73,694        74,336        73,480        72,630        —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 161,551      $ 158,584      $ 160,994      $ 155,966      $ 133,139      $ 30,950      $ 29,112  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(c)  Book value per share is computed by dividing total UCP stockholders’ equity by the net of total shares issued less shares held as treasury shares.

 

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SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA

The following table presents selected unaudited pro forma combined financial information including consolidated balance sheet and statements of operations, after giving effect to the Merger of Century Communities with UCP, as well as the private offering by Century Communities of $400 million in aggregate principal amount of its 5.875% Senior Notes due 2025, which closed on May 12, 2017. The information for the three months ended March 31, 2017 and the year ended December 31, 2016 under “Statement of Operations Data” in the table below give effect to the Merger as if it had been consummated on January 1, 2016, the beginning of the earliest period presented. The information under “Balance Sheet Data” in the table below assumes the Merger had been consummated on March 31, 2017. This unaudited pro forma combined financial information was prepared using the acquisition method of accounting with Century Communities considered the acquirer of UCP. See “Proposal I: Adoption of the Merger Agreement—Accounting Treatment of the Merger” beginning on page 99.

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 does not indicate the financial results of the combined company.

The following selected unaudited pro forma condensed combined financial data has been developed from and should be read in conjunction with the respective consolidated financial statements and related notes of each of Century Communities and UCP incorporated by reference into this proxy statement/prospectus, and the more detailed unaudited pro forma condensed combined financial statements, including the notes thereto, appearing elsewhere in this proxy statement/prospectus. See “Where You Can Find More Information” and “Unaudited Pro Forma Condensed Combined Financial Statements” beginning on pages 152 and 123, respectively, of this proxy statement/prospectus.

The following selected unaudited pro forma condensed combined financial data constitutes forward-looking information and is subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated. See “Risk Factors” and “Cautionary Information Regarding Forward-Looking Statements” beginning on pages 34 and 32, respectively, of this proxy statement/prospectus.

 

(Amounts in thousands, except per share amounts)              
     Three Months Ended
March 31, 2017
     Year Ended
December 31, 2016
 

Statement of Operations Data:

     

Total revenue

   $ 322,814      $ 1,343,808  

Income before income tax expense

   $ 16,248      $ 79,319  

Net income available to common stockholders

   $ 12,333      $ 62,042  

Income per common share

     

Basic

   $ 0.47      $ 2.44  

Diluted

   $ 0.46      $ 2.37  

Balance Sheet Data:

     

Total assets

   $ 1,518,025        NA  

Notes payable and revolving line of credit

   $ 777,948        NA  

 

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COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA

Historical per Share Data for Century Communities Common Stock and UCP Class A Common Stock

The historical per share data for Century Communities Common Stock and UCP Class A Common Stock below is derived from the audited consolidated financial statements of each of Century Communities and UCP as of and for the year ended December 31, 2016, and the unaudited condensed consolidated financial statements of each of Century Communities and UCP as of and for the three months ended March 31, 2017.

Unaudited Pro Forma Combined per Share Data for Century Communities Common Stock

The unaudited pro forma combined per share data for Century Communities Common Stock set forth below gives effect to the Merger as if it had been consummated on January 1, 2016, the beginning of the earliest period presented, in the case of continuing net income per share data, and as of March 31, 2017 and December 31, 2016 in the case of book value per share data, and assuming that each outstanding share of UCP Class A Common Stock had been converted into shares of Century Communities Common Stock based on the Stock Exchange Ratio of 0.2309.

The unaudited pro forma combined per share data for Century Communities Common Stock has been derived from the audited consolidated financial statements of each of Century Communities and UCP as of and for the year ended December 31, 2016, and the unaudited condensed consolidated financial statements of each of Century Communities and UCP as of and for the three months ended March 31 2017.

The unaudited pro forma combined per share data for Century Communities Common Stock has been derived using the acquisition method of accounting. See “Unaudited Pro Forma Condensed Combined Financial Statements” beginning on page 123 of this proxy statement/prospectus. Accordingly, the pro forma adjustments reflect the assets and liabilities of UCP at their preliminary estimated fair values. Differences between these preliminary estimates and the final values in acquisition accounting will occur and these differences could have a material impact on the unaudited pro forma combined per share information set forth below.

The unaudited pro forma combined per share data for Century Communities Common Stock does not purport to represent the actual results of operations that Century Communities would have achieved had the Merger been completed during these periods or to project the future results of operations that Century Communities may achieve after the Merger.

Unaudited Pro Forma Combined per UCP Equivalent Share Data

The unaudited pro forma combined per UCP equivalent share data set forth below shows the effect of the Merger from the perspective of an owner of UCP Class A Common Stock. The information was calculated by multiplying the unaudited pro forma combined per share data for Century Communities Common Stock by the Stock Exchange Ratio of 0.2309.

Generally

You should read the below information in conjunction with the selected historical consolidated financial data included elsewhere in this proxy statement/prospectus and the historical consolidated financial statements of Century Communities and UCP and related notes that have been filed with the SEC, certain of which are incorporated by reference into this proxy statement/prospectus. See “Selected Historical Consolidated Financial Data of Century Communities,” “Selected Historical Consolidated Financial Data of UCP” and “Where You Can Find More Information” beginning on pages 22, 24 and 152, respectively, of this proxy statement/prospectus. The unaudited pro forma combined per share data for Century Communities Common Stock and the unaudited pro forma combined per UCP equivalent share data is derived from, and should be read in conjunction with, the

 

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unaudited pro forma condensed combined financial statements and related notes included in this proxy statement/prospectus. See “Unaudited Pro Forma Condensed Combined Financial Statements” beginning on page 123 of this proxy statement/prospectus.

The following table sets forth certain historical and unaudited pro forma combined per share information for Century Communities and UCP.

 

     Three Months Ended
March 31, 2017
     Year Ended
December 31, 2016
 

Century Communities—Historical

     

Earnings per share:

     

Basic

   $ 0.40      $ 2.34  

Diluted

   $ 0.40      $ 2.33  

Book value per share of common stock (1)

   $ 22.27      $ 21.91  

Dividends declared per share of common stock

     —          —    

UCP—Historical

     

Earnings per share:

     

Basic

   $ 0.14      $ 1.16  

Diluted

   $ 0.14      $ 1.15  

Book value per share of common stock (2)

   $ 12.84      $ 12.74  

Dividends declared per share of common stock

     —          —    

Surviving Corporation Unaudited Pro Forma Combined Amounts

     

Earnings per share:

     

Basic

   $ 0.47      $ 2.44  

Diluted

   $ 0.46      $ 2.37  

Pro forma book value per share of common stock (3)

   $ 22.34        —    

UCP Unaudited Pro Forma Equivalent Per Share Data (4)

     

Earnings per share:

     

Basic

   $ 0.11      $ 0.56  

Diluted

   $ 0.11      $ 0.55  

Pro forma book value per share of common stock

   $ 5.16        —    

 

(1)  Calculated by dividing stockholders’ equity of $496.5 million and $473.6 million as of March 31, 2017 and December 31, 2016, respectively, by 22,291,222 and 21,620,544 outstanding shares of Century Communities Common Stock as of March 31, 2017 and December 31, 2016, respectively.
(2)  Calculated by dividing stockholders’ equity of $102.2 million and $100.6 million as of March 31, 2017 and December 31, 2016, respectively, by 7,958,314 and 7,896,488 outstanding shares of UCP Class A Common Stock as of March 31, 2017 and December 31, 2016, respectively.
(3) Calculated by dividing pro forma stockholders’ equity of $592.7 million by 26,530,554 pro forma outstanding shares of Century Communities Common Stock.
(4)  Amounts calculated by multiplying unaudited pro forma combined per share amounts by the Stock Exchange Ratio in the Merger (0.2309 shares of Century Communities Common Stock for each share of UCP Class A Common Stock). The Stock Exchange Ratio does not include the $5.32 cash portion of the Merger Consideration.

 

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COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION

Market Prices

Century Communities Common Stock is listed for trading on the NYSE under the ticker symbol “CCS.” UCP Class A Common Stock is listed for trading on the NYSE under the ticker symbol “UCP.”

Comparative Per Share Market Price Information

The following table presents the closing prices of UCP Class A Common Stock and Century Communities Common Stock on April 10, 2017, the last trading day before the public announcement of the Merger Agreement, and , 2017, the last practicable trading day prior to the mailing of this proxy statement/prospectus. The table also shows the estimated value of the per share consideration for each share of UCP Class A Common Stock on the relevant date.

 

Date

   UCP Closing
Price
     Century Communities
Closing Price
     Exchange Ratio      Estimated Value of the
Per Share
Consideration (1)
 

April 10, 2017

   $ 9.30      $ 26.10        0.2309      $ 11.35  

            , 2017

   $      $        0.2309      $  

 

(1)  The implied value of the per share consideration for each share of UCP Class A Common Stock represents the sum of $5.32, the cash portion of the Merger Consideration, plus the implied value of the stock portion of the Merger Consideration, based on the closing prices of Century Communities Common Stock of $26.10 on April 10, 2017 and $ on , 2017.

The above table shows only historical comparisons. The market price of UCP Class A Common Stock and Century Communities Common Stock will fluctuate prior to the UCP special meeting and before the consummation of the Merger, which will affect the implied value of the stock portion of the Merger Consideration paid to the UCP stockholders. These comparisons may not provide meaningful information to UCP stockholders in determining whether to adopt the Merger Agreement. UCP stockholders are urged to obtain current market quotations for Century Communities Common Stock and UCP Class A Common Stock and to review carefully the other information contained in, or incorporated by reference into, this proxy statement/prospectus in considering whether to adopt the Merger Agreement. See “Where You Can Find More Information” beginning on page 152 of this proxy statement/prospectus.

Comparative Stock Prices and Dividends

The following table sets forth, for the respective periods of UCP and Century Communities indicated, the high and low sale prices per share of UCP Class A Common Stock and Century Communities Common Stock as reported by the NYSE and cash dividends declared and paid. Neither UCP nor Century Communities has historically paid dividends on its common stock, and neither company presently anticipates paying any dividends on its common stock in the foreseeable future.

 

     UCP      Century Communities  
     High      Low      Dividends
Declared
and Paid
     High      Low      Dividends
Declared
and Paid
 

Quarter ended March 31, 2017

   $ 12.60      $ 9.55        —        $ 25.40      $ 20.75        —    

Year Ended December 31, 2016

                 

Quarter ended December 31, 2016

   $ 12.05      $ 8.45        —        $ 21.60      $ 16.49        —    

Quarter ended September 30, 2016

   $ 9.11      $ 7.71        —        $ 24.50      $ 18.90        —    

Quarter ended June 30, 2016

   $ 8.07      $ 7.00        —        $ 22.00      $ 18.76        —    

Quarter ended March 31, 2016

   $ 8.40      $ 5.46        —        $ 19.95      $ 14.45        —    

 

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     UCP      Century Communities  
     High      Low      Dividends
Declared
and Paid
     High      Low      Dividends
Declared
and Paid
 

Year Ended December 31, 2015

                 

Quarter ended December 31, 2015

   $ 8.00      $ 6.39        —        $ 21.60      $ 19.20        —    

Quarter ended September 30, 2015

   $ 8.44      $ 6.71        —        $ 21.51      $ 17.15        —    

Quarter ended June 30, 2015

   $ 9.27      $ 7.20        —        $ 18.85      $ 16.20        —    

Quarter ended March 31, 2015

   $ 10.77      $ 8.08        —        $ 17.07      $ 13.47        —    

Year Ended December 31, 2014

                 

Quarter ended December 31, 2014

   $ 13.79      $ 10.28        —        $ 19.04      $ 15.48        —    

Quarter ended September 30, 2014

   $ 14.11      $ 11.83      $ 0.2625      $ 23.34      $ 17.19        —    

Quarter ended June 30, 2014

   $ 15.08      $ 13.02        —        $ 23.40      $ 20.55        —    

Quarter ended March 31, 2014

     16.85        14.05      $ 0.2625      $ —        $ —          —    

Year Ended December 31, 2013

                 

Quarter ended December 31, 2013

     15.93        13.60        —        $ —        $ —          —    

Quarter ended September 30, 2013

     15.17        12.90        —        $ —        $ —          —    

Quarter ended June 30, 2013

     —          —          —          —          —          —    

Quarter ended March 31, 2013

     —          —          —          —          —          —    

 

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CAUTIONARY INFORMATION REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement/prospectus and the documents incorporated by reference into this proxy statement/prospectus contain certain forecasts and other forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, business strategies, operating efficiencies or synergies, revenue enhancements, and competitive positions, growth opportunities, plans and objectives of the management of each of Century Communities and UCP, the Merger and the markets for Century Communities and UCP Class A Common Stock and other matters. Statements in this proxy statement/prospectus and the documents incorporated by reference herein that are not historical facts are hereby identified as “forward-looking statements” for the purpose of the safe harbor provided by Section 21E of the Exchange Act and Section 27A of the Securities Act. These forward-looking statements, including, without limitation, those relating to the future business prospects, revenues and income of Century Communities and UCP, wherever they occur in this proxy statement/prospectus or the documents incorporated by reference herein, are necessarily estimates reflecting the best judgment of the respective managements of Century Communities and UCP and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. These forward-looking statements should, therefore, be considered in light of various important factors, including those set forth in and incorporated by reference into this proxy statement/prospectus.

Words such as “estimate,” “project,” “plan,” “intend,” “expect,” “anticipate,” “believe,” “would,” “should,” “could,” “may,” “will,” “predict,” “potential,” “continue,” “forecast” and similar expressions are intended to identify forward-looking statements. These forward-looking statements are found at various places throughout this proxy statement/prospectus, including in the section entitled “Risk Factors” beginning on page 34. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include those set forth in Century Communities’ and UCP’s filings with the SEC, including their respective Annual Reports on Form 10-K for 2016 (in the case of UCP, as amended by Amendment Number 1 to the 2016 Annual Report on Form 10-K/A, filed with the SEC on April 28, 2017). These important factors also include those set forth under “Risk Factors,” beginning on page 34, as well as, among others, risks and uncertainties relating to:

 

    the uncertainty of the value of the Merger Consideration due to the fixed Stock Exchange Ratio and potential fluctuation in the market price of Century Communities Common Stock;

 

    the ownership dilution to each separate company’s stockholders as a result of the issuance of shares of Century Communities Common Stock in the Merger;

 

    the failure to obtain necessary UCP stockholder approval for the adoption of the Merger Agreement;

 

    the obligation of Century Communities to complete the Merger even if financing is not available or is available only on terms other than those currently anticipated;

 

    the failure to satisfy required closing conditions or complete the Merger in a timely manner or at all;

 

    the risk that the Merger may not qualify as a reorganization under Section 368(a) of the Code and, as a result, UCP stockholders may be required to pay substantial U.S. federal income taxes;

 

    the effect of the announcement of the Merger on each company’s ability to retain and hire key personnel, maintain business relationships, and on operating results and the businesses generally;

 

    the effect of restrictions placed on Century Communities’ and UCP’s respective subsidiaries’ business activities and ability to pursue alternatives to the Merger pursuant to the Merger Agreement;

 

    the possibility of UCP’s directors and officers having interests in the Merger that are different from, or in addition to, the interests of UCP stockholders generally;

 

    the terms and availability of indebtedness Century Communities might incur in connection with the Merger;

 

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    the potential impact of the Merger on the respective stock prices of UCP and Century Communities and, after the Merger, Century Communities, and the dividends expected to be paid to the respective stockholders of UCP and Century Communities and, after the Merger, Century Communities stockholders in the future;

 

    the failure to realize projected cost savings and other benefits from the Merger;

 

    the incurrence of significant pre- and post-transaction related costs in connection with the Merger that are, and will be, incurred regardless of whether the Merger is completed;

 

    the difference in rights provided to UCP stockholders under the UCP Charter and the UCP Bylaws as compared to the rights UCP stockholders will obtain as Century Communities stockholders under the Century Communities Charter and the Century Communities Bylaws; and

 

    the occurrence of any event giving rise to the right of a party to terminate the Merger Agreement.

For a further discussion of these and other risks, contingencies and uncertainties that may impact Century Communities or UCP, and that UCP stockholders should consider prior to deciding whether to vote FOR the adoption of the Merger Agreement, see “Risk Factors” beginning on page 34 of this proxy statement/prospectus and in Century Communities’ and UCP’s other filings with the SEC incorporated by reference into this proxy statement/prospectus.

Due to these risks, contingencies and other uncertainties, you are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this proxy statement/prospectus as to the forward-looking statements contained in this proxy statement/prospectus, and as of the date of any document incorporated by reference into this proxy statement/prospectus as to any forward-looking statement incorporated by reference herein. Except as provided by federal securities laws, neither Century Communities nor UCP is required to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. All subsequent written or oral forward-looking statements attributable to Century Communities or UCP or any person acting on its or their behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Century Communities and UCP do not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date of this proxy statement/prospectus or to reflect the occurrence of unanticipated events, except as may be required under applicable federal securities laws.

 

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RISK FACTORS

In deciding how and whether to vote, UCP stockholders should carefully consider the following risk factors and all of the information contained in or incorporated by reference into this proxy statement/prospectus, including but not limited to, the matters addressed in “Cautionary Information Regarding Forward-Looking Statements” beginning on page 32 of this proxy statement/prospectus and the matters discussed under “Item 1A. Risk Factors” of Century Communities’ and UCP’s respective Annual Reports on Form 10-K for the year ended December 31, 2016 (in UCP’s case, as amended by Amendment Number 1 to the 2016 Annual Report on Form 10-K/A, filed with the SEC on April 28, 2017), as updated from time to time in Century Communities’ and UCP’s respective subsequent filings with the SEC, which are incorporated by reference into this proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 152 of this proxy statement/prospectus.

Risk Factors Relating to the Merger

The Stock Exchange Ratio is fixed and will not be adjusted in the event of any change in either Century Communities’ or UCP’s stock price. Because the market price of Century Communities Common Stock may fluctuate, the value of the Merger Consideration is uncertain.

In the Merger, each share of UCP Class A Common Stock (other than dissenters’ shares or treasury shares held by UCP and any shares of UCP Class A Common Stock owned by any UCP subsidiary, Century Communities or Century Communities subsidiary) will be converted into the right to receive and exchanged for the Merger Consideration, consisting of 0.2309 of a duly authorized, fully paid and nonassessable share of Century Communities Common Stock and $5.32 in cash, without any interest thereon. No fractional shares will be issued in the Merger, and UCP stockholders will receive cash in lieu of any fractional shares.

Because the Stock Exchange Ratio is fixed, the value of the Merger Consideration will depend on the market price of Century Communities Common Stock at the effective time of the Merger. The Stock Exchange Ratio will not be adjusted for changes in the market price of Century Communities Common Stock or UCP Class A Common Stock between the date of signing the Merger Agreement and completion of the Merger. There will be a lapse of time between the date on which UCP stockholders vote on the adoption of the Merger Agreement at the UCP special meeting and the date on which UCP stockholders entitled to receive shares of Century Communities Common Stock actually receive those shares. The value of the Merger Consideration has fluctuated since the date of the announcement of the Merger Agreement and will continue to fluctuate from the date of this proxy statement/prospectus to the effective time of the Merger and thereafter. The closing sale price per share of UCP Class A Common Stock as of April 10, 2017, the last trading date before the public announcement of the Merger Agreement, was $9.30, and the closing sale price per share has fluctuated as high as $         and as low as $         between that date and                 , 2017. The closing sale price per share of Century Communities Common Stock as of April 10, 2017, the last trading date before the public announcement of the Merger Agreement, was $26.10, and the closing sale price per share has fluctuated as high as $         and as low as $         between that date and                 , 2017. Accordingly, at the time of the UCP special meeting, the value of the Merger Consideration will not be known. Stock price changes may result from a variety of factors, including, among others, general market and economic conditions, changes in Century Communities’ and UCP’s respective operations and prospects, cash flows, and financial position, market assessments of the likelihood that the Merger will be completed, the timing of the Merger, and regulatory considerations. Moreover, the issuance of additional shares of Century Communities Common Stock in the Merger could depress the per share price of Century Communities Common Stock.

UCP stockholders are urged to obtain current market quotations for shares of Century Communities Common Stock and UCP Class A Common Stock before making a decision on whether to vote FOR the adoption of the Merger Agreement.

 

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Current Century Communities stockholders and UCP stockholders will generally have a reduced ownership and voting interest in Century Communities after the Merger.

Century Communities expects to issue to UCP stockholders approximately 4.2 million shares of Century Communities Common Stock in the Merger (which does not include shares of Century Communities Common Stock issuable in connection with the future vesting of outstanding stock options and restricted stock units of UCP following their conversion into reciprocal stock options and restricted stock units of Century Communities). Based on the expected number of shares of Century Communities Common Stock and UCP Class A Common Stock expected to be outstanding upon the completion of the Merger, current Century Communities stockholders and former UCP stockholders are expected to own approximately 83.2% and 16.4%, respectively, of Century Communities Common Stock.

Century Communities stockholders and UCP stockholders currently have the right to vote for their respective directors and on other matters affecting their respective companies. At the completion of the Merger, each UCP stockholder that receives shares of Century Communities Common Stock and is not already a stockholder of Century Communities will become a stockholder of Century Communities with a percentage ownership that will be smaller than such stockholder’s percentage ownership of UCP prior to the Merger. Correspondingly, each Century Communities stockholder will remain a stockholder of Century Communities with a percentage ownership that will generally be smaller than such stockholder’s percentage of Century Communities prior to the Merger. As a result of these reduced ownership percentages, each of Century Communities and UCP stockholders will generally have less voting power in, and influence on management and policies of, Century Communities after the Merger than they now have in their respective companies.

The Merger is subject to the receipt of certain approvals, including the approval from UCP stockholders as to the Merger Agreement. Failure to obtain these approvals would prevent completion of the Merger.

Before the Merger can be completed, UCP stockholders must adopt the Merger Agreement. There can be no assurance that such approval will be obtained. Failure to obtain the required approval may result in a material delay in, or the abandonment of, the Merger. Any delay in completing the Merger may materially adversely affect the timing and amount of cost savings and other benefits that are expected to be achieved from the Merger.

If Century Communities needs to pursue external financing options to consummate the Merger, the terms of such financing may be less favorable to Century Communities than expected, depending on market conditions.

There is no financing condition under the Merger Agreement, which means that if the conditions to closing are otherwise satisfied or waived, Century Communities is obligated to consummate the Merger whether or not it has sufficient funds to pay the consideration under the Merger Agreement. Century Communities currently intends to pay the cash portion of the Merger Consideration, repay and redeem certain outstanding indebtedness of UCP and its subsidiaries, and pay related fees and expenses in connection with the Merger using cash on hand. If Century Communities needs to pursue external financing options, it may result in unfavorable financing terms that could increase costs and/or materially adversely affect the financing and operating flexibility of the combined company.

The Merger is subject to a number of conditions to the obligations of both Century Communities and UCP to complete the Merger, which, if not fulfilled, or not fulfilled in a timely manner, may result in termination of the Merger Agreement.

The Merger Agreement contains a number of conditions to completion of the Merger, including:

 

    the adoption of the Merger Agreement by UCP stockholders at the UCP special meeting (or at any adjournment or postponement thereof);

 

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    the effectiveness of the registration statement of which this proxy statement/prospectus forms a part, and the absence of any stop order in respect thereof or proceedings initiated or threatened by the SEC for that purpose;

 

    the approval for listing on the NYSE of the shares of Century Communities Common Stock issuable to UCP stockholders in the Merger;

 

    the exchange of all Series A Units of UCP, LLC held by PICO for shares of UCP Class A Common Stock, and as a result thereof, UCP, LLC being a wholly-owned subsidiary of UCP;

 

    the absence of laws, orders, judgments and injunctions that restrain, enjoin or otherwise prohibit completion of the Merger;

 

    subject to certain exceptions, the accuracy of the respective representations and warranties of Century Communities and UCP, and compliance by Century Communities and UCP with their respective covenants, contained in the Merger Agreement;

 

    the absence of a material adverse effect relating to Century Communities or UCP; and

 

    the receipt of a tax opinion from each party’s tax counsel to the effect that the Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code.

Many of the conditions to completion of the Merger are not within either Century Communities’ or UCP’s control, and neither company can predict when or if these conditions will be satisfied. If any of these conditions are not satisfied or waived prior to October 15, 2017, it is possible that the Merger Agreement may be terminated. Although Century Communities and UCP have agreed in the Merger Agreement to use commercially reasonable efforts, subject to certain limitations, to complete the Merger as promptly as practicable, these and other conditions to the completion of the Merger may fail to be satisfied. In addition, satisfying the conditions to and completion of the Merger may take longer, and could cost more, than Century Communities and UCP expect. Neither Century Communities nor UCP can predict whether and when these other conditions will be satisfied. Furthermore, the requirements for obtaining the required clearances and approvals could delay the completion of the Merger for a significant period of time or prevent them from occurring. Any delay in completing the Merger may adversely affect the cost savings and other benefits that Century Communities expects to achieve if the Merger and the integration of the companies’ respective businesses are completed within the expected timeframe.

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

It is a condition to completion of the Merger that Paul, Weiss, tax counsel to UCP, and Greenberg Traurig, tax counsel to Century Communities, each deliver an opinion to both UCP and Century Communities, dated the closing date of the Merger, to the effect that the Merger will qualify for U.S. federal income tax purposes as a “reorganization” within the meaning of Section 368(a) of the Code. Each party may waive the requirement to receive such opinions as a condition to such party’s obligation to complete the Merger. These opinions will be based on certain assumptions and representations as to factual matters from Century Communities and UCP, as well as certain covenants and undertakings by Century Communities and UCP, all of which must continue to be true and accurate as of the effective time of the Merger. If any of the assumptions, representations, covenants or undertakings is incorrect, incomplete, inaccurate or is violated, one or both of the opinions may not be delivered and, if delivered, the conclusions reached by counsel in their opinions cannot be relied upon and the tax consequences of the Merger could differ from those described in this proxy statement/prospectus. Additionally, an opinion of counsel represents counsel’s best legal judgment but is not binding on the IRS or any court, so there can be no certainty that the IRS will not challenge the conclusions reflected in the opinions or that a court will not sustain such a challenge. If the IRS or a court determines that the Merger does not qualify as a “reorganization,” a U.S. holder of UCP Class A Common Stock would generally recognize taxable gain or loss for U.S. federal income tax purposes upon the exchange equal to the difference between (1) the sum of the

 

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amount of cash and the fair market value of the Century Communities Common Stock received by such U.S. holder, and (2) such U.S. holder’s tax basis in the UCP Class A Common Stock surrendered in the exchange. Depending on such holder’s particular circumstances, any such determination could result in such holder being required to pay substantial additional U.S. federal income taxes.

UCP stockholders will not be permitted to recognize loss for U.S. federal income tax purposes in connection with the Merger.

Assuming that the Merger qualifies as a reorganization under Section 368(a) of the Code, a UCP stockholder who surrenders shares of UCP Class A Common Stock in exchange for a combination of Century Communities Common Stock and cash in the Merger will not be permitted to recognize, for U.S. federal income tax purposes, any losses realized in respect of such exchange except as discussed in “Proposal I: Adoption of the Merger Agreement—Material U.S. Federal Income Tax Consequences of the MergerCash in Lieu of Fractional Shares.”

Uncertainties associated with the Merger may cause a loss of management personnel and other key employees which could adversely affect the future business and operations of Century Communities following the Merger.

Century Communities and UCP are dependent on the experience and industry knowledge of their officers and other key employees to execute their business plans. Century Communities’ success after the Merger will depend in part upon its ability to retain key management personnel and other key employees. Current and prospective employees of Century Communities and UCP may experience uncertainty about their roles within Century Communities following the Merger or other concerns regarding the timing and completion of the Merger or the operations of Century Communities following the Merger, any of which may have an adverse effect on the ability of each of Century Communities and UCP to attract or retain key management and other key personnel. Accordingly, no assurance can be given that Century Communities following the Merger will be able to attract or retain key management personnel and other key employees of Century Communities and UCP to the same extent that Century Communities and UCP have previously been able to attract or retain their own employees. If Century Communities is unable to retain key management personnel and other key employees who are critical to the successful integration and future operations of Century Communities following the Merger, Century Communities could face disruptions in its operations, loss of existing customers, loss of key information, expertise or know-how, and unanticipated additional recruitment and training costs. In addition, the loss of key personnel could diminish the anticipated benefits of the Merger.

The pendency of the Merger could materially adversely affect the business, financial condition, results of operations or cash flows of Century Communities and UCP.

In connection with the pending Merger, some homebuying customers or vendors of each of Century Communities and UCP may delay or defer decisions on continuing or expanding their business dealings with the companies, which could materially adversely affect the revenues, earnings, cash flows and expenses of Century Communities and UCP, regardless of whether the Merger is consummated. Similarly, current and prospective employees of Century Communities and UCP may experience uncertainty about their future roles with Century Communities following the consummation of the Merger, which may materially adversely affect the ability of each of Century Communities and UCP to attract, retain and motivate key personnel during the pendency of the Merger and which may materially adversely divert attention from the daily activities of Century Communities’ and UCP’s existing employees. In addition, due to operating covenants in the Merger Agreement, UCP may be unable, during the pendency of the Merger, to pursue strategic transactions, undertake certain significant financing transactions and otherwise pursue other actions that are not in the ordinary course of business, even if such actions would prove beneficial. Further, the Merger may give rise to potential liabilities, including those that may result from future stockholder lawsuits relating to the Merger. Any of these matters could materially adversely affect the businesses, financial condition, results of operations and cash flows of Century Communities and UCP.

 

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Completion of the Merger may trigger change in control or other provisions in certain agreements to which UCP is a party.

Completion of the Merger may trigger change in control or other provisions in certain agreements to which UCP is a party. If Century Communities and UCP are unable to negotiate waivers of those provisions, the counterparties may exercise their rights and remedies under the agreements, potentially terminating the agreements or seeking monetary damages. Even if Century Communities and UCP are able to negotiate waivers, the counterparties may require a fee for such waivers or seek to renegotiate the agreements on terms less favorable to UCP or the combined company.

The Merger Agreement subjects Century Communities and UCP to restrictions on their business activities prior to the effective time of the Merger.

The Merger Agreement subjects Century Communities and UCP to restrictions on their business activities and obligates Century Communities and UCP to generally operate their businesses in the ordinary course, consistent with past practice, until the effective time of the Merger. These restrictions could prevent Century Communities and UCP from pursuing attractive business opportunities that arise prior to the effective time of the Merger and are outside the ordinary course of business.

The market price of Century Communities Common Stock after the Merger may be affected by factors different from those currently affecting Century Communities Common Stock or UCP Class A Common Stock.

Upon consummation of the Merger, UCP stockholders will become holders of Century Communities Common Stock. The business of Century Communities differs from that of UCP in important respects and, accordingly, the results of operations of the combined company and the market price of shares of Century Communities Common Stock following the Merger may be affected by factors different from those currently affecting the independent operations of Century Communities and UCP. For a discussion of the businesses of Century Communities and UCP and of certain factors to consider in connection with those businesses, see the documents incorporated by reference into this proxy statement/prospectus referred to under “Where You Can Find More Information” beginning on page 152 of this proxy statement/prospectus.

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

In considering the recommendation of the UCP Board that UCP stockholders vote FOR the adoption of the Merger Agreement, UCP stockholders should be aware and take into account the fact that certain UCP directors and executive officers have interests in the Merger that may be different from, or in addition to, the interests of UCP stockholders generally and that may create potential conflicts of interest. These include severance rights, rights to continuing indemnification and directors’ and officers’ liability insurance and accelerated vesting of certain restricted stock awards. See “Proposal I: Adoption of the Merger Agreement—Interests of Certain UCP Directors and Officers in the Merger” beginning on page 92 of this proxy statement/prospectus for a more detailed description of these interests. The UCP Board was aware of and carefully considered these interests, among other matters, in evaluating the terms and structure, and overseeing the negotiation of, the Merger, in approving the Merger Agreement and in recommending that UCP stockholders vote FOR the adoption of the Merger Agreement and FOR the adjournment proposal.

The Merger Agreement limits UCP’s ability to pursue alternatives to the Merger and may discourage other companies from trying to acquire UCP.

The Merger Agreement contains “no shop” provisions that restricts UCP’s ability to solicit or initiate discussions with third parties regarding other proposals to acquire UCP, and UCP has agreed to certain terms and

 

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conditions relating to its ability to respond to, enter into discussion and negotiation with respect to, and approve and accept, certain unsolicited proposals that constitute or are reasonably likely to lead to a superior proposal. In addition, Century Communities generally has an opportunity to offer to modify the terms of the Merger Agreement in response to any competing acquisition proposals before the UCP Board may withdraw or qualify its recommendation to UCP stockholders in favor of the adoption of the Merger Agreement. The Merger Agreement further provides that, upon termination of the Merger Agreement under specified circumstances, including termination by UCP to enter into a definitive agreement for a proposal that constitutes a superior proposal, UCP will be required to pay Century Communities a cash termination fee of $7,050,000.

These provisions could discourage a potential third-party acquirer that might have an interest in acquiring all or a significant portion of UCP from considering or proposing that acquisition, even if it were prepared to pay consideration with a higher per share cash or total value than the total Merger Consideration to be paid by Century Communities and received by UCP stockholders in the Merger. These provisions might also result in a potential third-party acquirer proposing to pay a lower price to UCP stockholders than such third-party acquirer might otherwise have proposed to pay because of the added expense of the termination fee. See “Merger Agreement—No Solicitation of Alternative Proposals” beginning on page 109 of this proxy statement/prospectus.

Failure to complete the Merger could negatively impact Century Communities’ or UCP’s stock price and have a material adverse effect on their results of operations, cash flows and financial position.

If the Merger is not completed for any reason, including as a result of UCP stockholders failing to adopt the Merger Agreement, the ongoing businesses of Century Communities and UCP may be materially adversely affected and, without realizing any of the benefits of having completed the Merger, Century Communities and UCP would be subject to a number of risks, including the following:

 

    Century Communities and UCP may experience negative reactions from the financial markets, including negative impacts on their respective stock prices;

 

    Century Communities and UCP and their respective subsidiaries may experience negative reactions from their respective homebuying customers, vendors, regulators and employees;

 

    Century Communities and UCP will still be required to pay certain significant costs relating to the Merger, such as legal, accounting and financial advisor fees, employee benefit costs, and filing and printing fees;

 

    UCP may be required to pay the $7,050,000 cash termination fee as required by the Merger Agreement;

 

    the Merger Agreement places certain restrictions on the conduct of the respective businesses pursuant to the terms of the Merger Agreement, which may have delayed or prevented the respective companies from undertaking business opportunities that, absent the Merger Agreement, may have been pursued;

 

    matters relating to the Merger (including integration planning) require substantial commitments of time and resources by each company’s management, which could have resulted in the distraction of each company’s management from ongoing business operations and pursing other opportunities that could have been beneficial to the companies; and

 

    litigation related to any failure to complete the Merger or related to any enforcement proceeding commenced against Century Communities or UCP to perform their respective obligations under the Merger Agreement.

If the Merger is not completed, the risks described above may materialize and they may have a material adverse effect on Century Communities’ or UCP’s results of operations, cash flows, financial position and stock prices.

 

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Failure to complete the Merger could negatively affect the ability of UCP to refinance its 8.5% Senior Notes due 2017 before maturity.

UCP’s 8.5% Senior Notes due 2017 (which we refer to as the “2017 Notes”) have an aggregate outstanding principal amount of $75 million and mature on October 21, 2017. This significant maturity represents approximately 46.2% of UCP’s outstanding debt (including capital lease obligations but excluding intercompany liabilities) as of March 31, 2017. If the Merger is not completed before the 2017 Notes become due, UCP will have to satisfy this maturity, and UCP’s ability to do so will depend on its future operating performance and financial results, which will be subject, in part, to factors beyond UCP’s control, including interest rates and general economic, financial and competitive conditions. UCP’s sources of capital to satisfy this maturity may include retained capital, the issuance of equity securities, debt financing and refinancing and asset sales or a combination of any of the foregoing. However, no assurance can be given that any of these sources of capital will be available to UCP on favorable terms, or at all, or that such sources will enable UCP to be able to satisfy the maturity of the 2017 Notes. Any refinancing of the 2017 Notes may be on terms less favorable than those applicable to the 2017 Notes. As a result, UCP can provide no assurance that it will be able to refinance or repay the 2017 Notes as UCP currently anticipates or at all. UCP’s failure to refinance or repay the 2017 Notes at their stated maturity would have a material adverse impact on UCP’s financial condition, results of operations, cash flow, liquidity, the market price of UCP Class A Common Stock and UCP’s ability to achieve its objectives.

In addition, the restrictions on the conduct of UCP’s business under the Merger Agreement generally inhibit incurring new indebtedness outside the ordinary course, which may limit UCP’s ability to refinance the 2017 Notes before the earlier of the completion of the Merger or termination of the Merger Agreement. Although UCP and Century Communities have agreed to certain exceptions to these restrictions permitting UCP to negotiate, enter into and incur certain fees under (but not draw on) replacement credit facilities between signing and closing, there can be no assurance that UCP will be able to negotiate or enter into any such replacement facilities prior to a potential termination of the Merger Agreement or that UCP will be able to otherwise refinance the 2017 Notes on commercially acceptable terms or at all between any potential termination of the Merger Agreement and the maturity of the 2017 Notes.

Negative publicity related to the Merger may materially adversely affect Century Communities and UCP.

Political and public sentiment in connection with a proposed combination may result in a significant amount of adverse press coverage and other adverse public statements affecting the parties to the Merger. Adverse press coverage and public statements, whether or not driven by political or popular sentiment, may also result in legal claims or in investigations by regulators, legislators and law enforcement officials. Responding to these investigations and lawsuits, regardless of the ultimate outcome of the proceedings, can divert the time and effort of senior management from operating their businesses. Addressing any adverse publicity, governmental scrutiny or enforcement of other legal proceedings is time-consuming and expensive and, regardless of the factual basis for the assertions being made, could have a negative effect on the reputation of Century Communities and UCP, on the morale of their employees and on their relationships with regulators. It may also have a negative impact on their ability to take timely advantage of various business and market opportunities. All of these factors may materially adversely affect Century Communities’ and UCP’s respective business and cash flows, financial condition and results of operations.

The unaudited pro forma condensed combined financial statements and the unaudited prospective financial information prepared by Century Communities and UCP included in this proxy statement/prospectus are based on a number of preliminary estimates and assumptions and the actual results of operations, cash flows and financial position of Century Communities after the Merger may differ materially.

The unaudited pro forma condensed combined financial information in this proxy statement/prospectus is presented for illustrative purposes only and is not necessarily indicative of what Century Communities’ actual results of operations, cash flows and financial position would have been had the Merger been completed on the

 

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dates indicated. The unaudited pro forma condensed combined financial information reflects adjustments, which are based upon preliminary estimates, to record the UCP identifiable assets to be acquired and liabilities to be assumed at fair value, and the resulting goodwill to be recognized. The purchase price allocation reflected is preliminary, and final allocation of the purchase price will be based upon the actual purchase price and the fair value of the assets acquired and liabilities assumed in the Merger. Accordingly, the final acquisition accounting adjustments may differ materially from the pro forma adjustments reflected in this document. The unaudited pro forma condensed combined financial information is also based on a number of other estimates and assumptions, including estimates and assumptions of the type and terms of debt to be incurred to pay the related fees and expenses. If the type or terms of the new debt actually incurred differ materially from the estimates and assumptions set out in the accompanying unaudited pro forma condensed combined financial information, Century Communities’ actual results and financial condition after the completion of the Merger could differ materially from the results and financial condition contemplated by the unaudited pro forma condensed combined financial information.

The unaudited prospective financial information prepared by Century Communities and UCP in this proxy statement/prospectus was prepared for each company’s internal purposes and is presented in this proxy statement/prospectus because such forecasts were furnished to the Century Communities Board, the UCP Board and their respective financial advisors. The unaudited prospective financial information is based on numerous variables and assumptions that are inherently uncertain and are beyond the control of each company’s management team, including assumptions with respect to macro-economic trends, interest rates and anticipated growth rates, and is not necessarily indicative of what each company’s actual results of operations, cash flows or financial position would be on the dates indicated. The assumptions used in preparing these forecasts may not prove to be accurate and other factors may affect Century Communities’ actual results and financial condition after the completion of the Merger, which may cause Century Communities’ actual results and financial condition to differ materially from the estimates contained in the unaudited prospective financial information prepared by Century Communities and UCP.

The shares of Century Communities Common Stock to be received by UCP stockholders upon completion of the Merger will have different rights from shares of UCP Class A Common Stock.

Upon completion of the Merger, UCP stockholders will no longer be stockholders of UCP. Instead, former UCP stockholders will become stockholders of Century Communities and their rights as Century Communities stockholders will be governed by the terms of the Century Communities Charter and the Century Communities Bylaws. The terms of the Century Communities Charter and the Century Communities Bylaws are in some respects materially different than the terms of the UCP Charter and the UCP Bylaws, which currently govern the rights of UCP stockholders. See “Comparison of Stockholder Rights” beginning on page 138 of this proxy statement/prospectus for a discussion of the different rights associated with shares of Century Communities Common Stock and shares of UCP Class A Common Stock.

Potential litigation instituted against UCP and its directors challenging the proposed Merger may prevent the Merger from becoming effective within the expected timeframe or at all.

Potential litigation related to the Merger may result in injunctive or other relief prohibiting, delaying or otherwise adversely affecting UCP’s ability to complete the Merger. Such relief may prevent the Merger from becoming effective within the expected timeframe or at all. In addition, defending against such claims may be expensive and divert management’s attention and resources, which could adversely affect the respective businesses of UCP and Century Communities.

 

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Risk Factors Relating to Century Communities Following the Merger

Century Communities may be unable to successfully integrate the businesses of Century Communities and UCP successfully or realize the anticipated benefits of the Merger.

The Merger involves the combination of two companies that currently operate as independent public companies. Century Communities will be required to devote significant management attention and resources to integrating the business practices and operations of Century Communities and UCP. Potential difficulties that Century Communities may encounter as part of the integration process include the following:

 

    the inability to successfully combine the businesses of Century Communities and UCP in a manner that permits Century Communities to achieve, on a timely basis, or at all, the enhanced revenue opportunities and cost savings and other benefits anticipated to result from the Merger;

 

    complexities associated with managing the combined businesses, including difficulty addressing possible differences in corporate cultures and management philosophies and the challenge of integrating complex systems, technology, networks and other assets of each of the companies in a seamless manner that minimizes any adverse impact on homebuying customers, suppliers, employees and other constituencies; and

 

    potential unknown liabilities and unforeseen increased expenses or delays associated with the Merger.

In addition, Century Communities and UCP have operated and, until the completion of the Merger will continue to operate, independently. It is possible that the integration process could result in:

 

    diversion of the attention of each company’s management; and

 

    the disruption of, or the loss of momentum in, each company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies.

Any of these issues could adversely affect each company’s ability to maintain relationships with homebuying customers, suppliers, employees and other constituencies or achieve the anticipated benefits of the Merger, or could reduce each company’s earnings or otherwise adversely affect the business and financial results of Century Communities following the Merger.

Century Communities may be unable to realize anticipated cost synergies and expects to incur substantial expenses related to the Merger, which could have a material adverse effect on Century Communities’ business, financial condition and results of operations.

Following the consummation of the Merger, Century Communities expects to realize annualized cost synergies of approximately $5.0 million beginning in 2018.

While Century Communities believes these cost synergies are achievable, Century Communities’ ability to achieve such estimated cost synergies in the timeframe described, or at all, is subject to various assumptions by Century Communities’ management, which may or may not be realized, as well as the incurrence of other costs in Century Communities’ operations that offset all or a portion of such cost synergies. As a consequence, Century Communities may not be able to realize all of these cost synergies within the timeframe expected or at all. In addition, Century Communities may incur additional and/or unexpected costs in order to realize these cost synergies. Failure to achieve the expected cost synergies could significantly reduce the expected benefits associated with the Merger and adversely affect Century Communities.

In addition, Century Communities has incurred and will incur substantial expenses in connection with the negotiation and consummation of the transactions contemplated by the Merger Agreement, including the costs and expenses of filing this proxy statement/prospectus with the SEC.

 

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Century Communities expects to continue to incur non-recurring costs associated with consummating the Merger, combining the operations of the two companies and achieving the desired cost synergies. These fees and costs have been, and will continue to be, substantial. The substantial majority of non-recurring expenses will consist of transaction costs related to the Merger and include, among others, fees paid to legal, accounting and financial advisors, employee benefit costs, and filing and printing fees.

These costs described above, as well as other unanticipated costs and expenses, could have a material adverse effect on the financial condition and operating results of Century Communities following the consummation of the Merger and many of these costs will be borne by Century Communities even if the Merger is not consummated.

The future results of Century Communities following the Merger will suffer if Century Communities does not effectively manage its expanded operations.

Following the Merger, the size of the business of Century Communities will increase significantly beyond the current size of either Century Communities’ or UCP’s business. Century Communities’ future success will depend, in part, upon its ability to manage this expanded business, which will pose substantial challenges for management, including challenges related to the management and monitoring of new operations and associated increased costs and complexity. There can be no assurances that Century Communities will be successful or that it will realize the expected operating efficiencies, cost savings, revenue enhancements or other benefits currently anticipated from the Merger.

Century Communities and UCP face competition, which is expected to intensify and which may reduce the market share and profits of Century Communities after consummation of the Merger.

Competition in the homebuilding industry is intense, and there are relatively low barriers to entry in the industry. Homebuilders compete for, among other things, home buying customers, desirable land parcels, financing, raw materials and skilled labor. Increased competition could hurt Century Communities’ and UCP’s businesses, as it could prevent both companies from acquiring attractive land parcels on which to build homes or make such acquisitions more expensive, hinder their market share expansion and lead to pricing pressures on their homes that may adversely impact their margins and revenues. If Century Communities is unable to successfully compete following the Merger, its business, prospects, liquidity, financial condition and results of operations could be materially and adversely affected.

Following the consummation of the Merger, Century Communities’ competitive position could be weakened by strategic alliances or consolidation within the advisory services industry or the development of new technologies. Century Communities’ ability to compete successfully will depend on how well it markets its products and services and on its ability to anticipate and respond to various competitive factors affecting the industry, including changes in consumer preferences or demographics, and changes in the product offerings or pricing strategies of Century Communities’ competitors.

After the consummation of the Merger, competition could materially adversely affect Century Communities in several ways, including (i) the loss of customers and market share, (ii) Century Communities’ need to lower prices or increase marketing expenses to remain competitive and (iii) the loss of business relationships within Century Communities’ existing markets.

The market price of Century Communities Common Stock may decline in the future as a result of the sale of such shares held by former UCP stockholders or current Century Communities stockholders or due to other factors.

Based on the number of shares of UCP Class A Common Stock outstanding as of April 10, 2017, and adjusted for unvested stock awards of UCP that vest prior to the Merger and the exchange of all Series A Units of

 

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UCP, LLC held by PICO for shares of UCP Class A Common Stock immediately prior to the effective time of the Merger, Century Communities expects to issue approximately 4.2 million shares of Century Communities Common Stock to UCP stockholders in the Merger (which does not include shares of Century Communities Common Stock issuable in connection with the future vesting of outstanding stock options and restricted stock units of UCP following their conversion into reciprocal stock options and restricted stock units of Century Communities). Upon the receipt of Century Communities Common Stock as Merger Consideration, former holders of shares of UCP Class A Common Stock may seek to sell the Century Communities Common Stock delivered to them. Current Century Communities stockholders may also seek to sell Century Communities Common Stock held by them following, or in anticipation of, consummation of the Merger. These sales (or the perception that these sales may occur), coupled with the increase in the outstanding number of Century Communities Common Stock, may affect the market for, and the market price of, Century Communities Common Stock in an adverse manner. None of these stockholders are subject to “lock-up” or “market stand off” agreements.

The market price of Century Communities Common Stock may also decline in the future as a result of the consummation of the Merger for a number of other reasons, including:

 

    the unsuccessful integration of UCP into Century Communities;

 

    the failure of Century Communities to achieve the anticipated benefits of the Merger, including financial results (and any associated cost synergies), as rapidly as or to the extent anticipated;

 

    decreases in Century Communities’ financial results before or after the consummation of the Merger; and

 

    general market or economic conditions unrelated to Century Communities’ performance.

These factors are, to some extent, beyond the control of Century Communities.

Century Communities is expected to incur substantial expenses related to the Merger and integration.

Century Communities is expected to incur substantial expenses in connection with the Merger and the related integration. There are a large number of processes, policies, procedures, operations, technologies and systems that may need to be integrated, including purchasing, accounting and finance, sales, payroll, pricing and benefits. While Century Communities has assumed that a certain level of expenses will be incurred, there are many factors beyond its 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. These expenses could, particularly in the near term, exceed the savings that Century Communities expects to achieve from the elimination of duplicative expenses and the realization of economies of scale and cost savings. These integration expenses likely will result in Century Communities taking significant charges against earnings following the completion of the Merger, and the amount and timing of such charges are uncertain at present.

Century Communities may not be able to continue to grow through acquisitions.

In the past, Century Communities has sought growth through acquisitions of, or significant investments in, businesses that offer complementary products and services or otherwise support its growth objectives. However, following the consummation of the Merger, Century Communities cannot assure you that it will continue to identify attractive acquisition targets and consummate acquisitions. Upon consummation of the Merger and the incurrence of debt in connection therewith, Century Communities’ anticipated level of indebtedness will be significantly higher than prior to the consummation of the Merger. As a result, Century Communities cannot assure you that it will be able to arrange financing for future acquisitions on terms acceptable to it. In addition, the combined company will be a substantially larger company than Century Communities is at this time and may face additional scrutiny in connection with federal and state governmental approvals in connection with any future acquisitions of attractive targets and may not be able to obtain such approvals at all. The realization of any of these risks could adversely affect Century Communities’ business.

 

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Following the consummation of the Merger, Century Communities will be bound by all of the obligations and liabilities of both companies.

Following the consummation of the Merger, Century Communities will become bound by all of the obligations and liabilities of UCP in addition to Century Communities’ obligation and liabilities existing prior to the consummation of the Merger. Neither Century Communities nor UCP can predict the financial condition of Century Communities at the time of the combination or the ability of Century Communities to satisfy its obligations and liabilities.

The Merger may result in a loss of suppliers or strategic alliances and may result in the termination of existing contracts.

Following the Merger, some of the suppliers or strategic partners of Century Communities or UCP, as historical businesses, may terminate or scale back their business relationship with Century Communities. Century Communities and UCP have contracts with suppliers, vendors, and other business partners which may require Century Communities or UCP to obtain consents from these other parties in connection with the Merger, which may not be obtained at all or on favorable terms. If supplier relationships or strategic alliances are adversely affected by the Merger, or if Century Communities, following the Merger, loses the benefits of the contracts of Century Communities or UCP, Century Communities’ business and financial performance could suffer.

Century Communities may have to make additional contributions following completion of the Merger to fund its pension and other post-retirement benefit plans, including UCP plans.

Century Communities and UCP and their respective subsidiaries currently maintain and contribute to defined benefit pension plans and other post-retirement benefit plans that cover various categories of employees and retirees. The obligation to make contributions to fund benefit obligations under these pension and other post-retirement benefit plans is based on actuarial valuations, which are based on certain assumptions, including the long-term return on plan assets and the discount rate. Century Communities may have to make additional contributions following completion of the Merger to fund its pension and other post-retirement benefit plans, including any such UCP plans. Additional contributions could have a material adverse effect on the results of operations, cash flows and financial position of Century Communities.

Century Communities’ level of indebtedness could increase if it continues to acquire additional businesses and make strategic investments.

On May 12, 2017, Century Communities completed a private offering of $400 million in aggregate principal amount of its 5.875% Senior Notes due 2025 (the “May 2017 Notes”) at an issue price of 100%, which resulted in net proceeds of approximately $395.0 million after offering costs. The May 2017 Notes were sold and issued in a private offering, exempt from the registration requirements of the Securities Act, to qualified institutional buyers in reliance on Rule 144A under the Securities Act, and to certain non-U.S. persons in transactions outside the United States in reliance on Regulation S under the Securities Act. Utilizing the net proceeds from the offering of the May 2017 Notes, upon consummation of the Merger, Century Communities intends to (i) repay UCP’s outstanding indebtedness of approximately $161.6 million, which approximates its fair value, and (ii) pay the cash portion of the Merger Consideration (in the aggregate amount of approximately $97.7 million) to UCP stockholders in connection with the Merger. As of March 31, 2017, Century Communities’ consolidated indebtedness, on a pro forma basis after taking into account the foregoing transactions described above, would be approximately $777.9 million.

Century Communities expects to continue to evaluate the possibility of acquiring additional businesses and making strategic investments, and Century Communities may elect to finance these endeavors by incurring additional indebtedness. Moreover, to respond to competitive challenges, Century Communities may be required to raise substantial additional capital to finance new product offerings. As a result, Century Communities’ indebtedness could increase relative to the level of indebtedness at the closing of the Merger, and the related risks that Century Communities faces could intensify.

 

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Century Communities’ anticipated level of indebtedness following the consummation of the Merger, together with any additional indebtedness it may incur in the future, could adversely affect Century Communities in a number of ways. For example, the anticipated level of indebtedness or any additional financing could or will:

 

    make it more difficult for Century Communities to pay or refinance its debts as they become due during adverse economic, financial market and industry conditions;

 

    require Century Communities to use a larger portion of its cash flow for debt service, reducing funds available for other purposes;

 

    cause Century Communities to be less able to take advantage of business opportunities, such as acquisition opportunities, and to react to changes in market or industry conditions;

 

    increase Century Communities’ vulnerability to adverse economic, industry or competitive developments;

 

    affect Century Communities’ ability to obtain additional financing, particularly as substantially all of Century Communities’ assets will be subject to liens securing certain of its indebtedness;

 

    decrease Century Communities’ profitability and/or cash flow or require Century Communities to dispose of significant assets in order to satisfy its debt service and other obligations if it is not able to satisfy these obligations from cash from operations or other sources;

 

    cause Century Communities to be disadvantaged compared to competitors with less leverage; and

 

    limit Century Communities’ ability to borrow additional funds in the future to fund working capital, capital expenditures and other general corporate purposes.

The terms of Century Communities’ indebtedness as of the date of this proxy statement/prospectus and following the consummation of the Merger are expected to include covenants that, among other things, restrict Century Communities’ ability to: (i) dispose of assets; (ii) incur additional indebtedness; (iii) incur guarantee obligations; (iv) prepay certain other indebtedness or amend other financing arrangements; (v) pay dividends; (vi) create liens on assets; (vii) enter into sale and leaseback transactions; (viii) make investments, loans or advances; (ix) make acquisitions; (x) engage in mergers or consolidations; (xi) change the business conducted; and (xii) engage in certain transactions with affiliates. In addition, under its existing revolving credit facility, Century Communities is subject to financial maintenance covenants requiring that its leverage levels not exceed specified levels and that it maintain at least a specified interest coverage ratio. Century Communities’ failure to comply with any of these covenants could result in an event of default that, if not cured or waived, could result in the acceleration of certain of its debt, which could have a material adverse effect on Century Communities’ business, financial condition and results of operations.

Century Communities may not be able to service all of its indebtedness and may be forced to take other actions to satisfy its obligations under its indebtedness, which may not be successful. Century Communities’ failure to meet its debt service obligations could have a material adverse effect on Century Communities’ business, financial condition and results of operations.

Century Communities estimates that the annual cash interest payments on the combined company’s debt, following the consummation of the Merger would be approximately $50.1 million, which can fluctuate depending on changes in interest rates. Century Communities depends on cash on hand and cash flows from operations to make scheduled debt payments. Century Communities expects to be able to meet the estimated cash interest payments on the combined company’s debt following the Merger through a combination of (i) the expected cash flows from operations of the combined company, (ii) cash generated from the sale of non-core assets, and (iii) to a limited extent, the undrawn capacity under its revolving credit facility. However, Century Communities’ ability to generate sufficient cash flow from operations of the combined company and to utilize other methods to make scheduled payments will depend on a range of economic, competitive and business factors, many of which are outside of its control. However, there can be no assurance that these sources will be

 

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adequate. If Century Communities is unable to service its indebtedness and fund its operations, Century Communities will be forced to adopt an alternative strategy that may include:

 

    limiting its growth;

 

    seeking additional capital;

 

    selling assets; or

 

    restructuring or refinancing its indebtedness.

Even if Century Communities adopts an alternative strategy, the strategy may not be successful and Century Communities may be unable to service its indebtedness and fund its operations, which could have a material adverse effect on Century Communities’ business, financial condition or results of operations.

The enactment of proposed legislation in California could materially impact the combined company’s financial position and results of operations following the Merger.

On January 23, 2017, California Assembly Bill No. 199 (which we refer to as “AB 199”) was proposed in the California legislature. Interpreted broadly, the initial version of AB 199 mandated the payment of prevailing wages for newly constructed and privately financed housing in California. As originally proposed, such a mandate would significantly increase the costs of construction in California, which would make certain projects in California economically infeasible. On April 6, 2017, the text of AB 199 was amended to exempt private residential projects. There can be no assurance, however, that AB 199 will not be subsequently amended to include private residential projects in the future. Due to UCP’s existing homebuilding activities in California, the enactment of AB 199 or other similar legislation may adversely affect the combined company’s financial position and results of operations following the Merger.

Other Risk Factors Relating to Century Communities and UCP

As a result of entering into the Merger Agreement, Century Communities’ and UCP’s businesses are and will be subject to the risks described above. In addition, Century Communities and UCP are, and following completion of the Merger, Century Communities will continue to be, subject to the risks described in Century Communities’ and UCP’s respective Annual Reports on Form 10-K for the fiscal year ended December 31, 2016 (in UCP’s case, as amended by Amendment Number 1 to the 2016 Annual Report on Form 10-K/A, filed with the SEC on April 28, 2017), as updated from time to time in their subsequent filings with the SEC, including those incorporated by reference into this proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 152 of this proxy statement/prospectus.

 

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THE COMPANIES

Century Communities, Inc.

Century Communities is engaged in the development, design, construction, marketing and sale of single-family attached and detached homes in metropolitan areas in Colorado, Austin and San Antonio, Texas (which we refer to as “Central Texas”), Houston, Texas, Las Vegas, Nevada, Atlanta, Georgia, Salt Lake City, Utah, and Charlotte, North Carolina. In many of its projects, in addition to building homes, Century Communities is responsible for the entitlement and development of the underlying land. Century Communities’ homebuilding operations are organized into the following seven operating segments based on the geographic markets in which it operates: Atlanta, Central Texas, Charlotte, Colorado, Houston, Nevada, and Utah. Additionally, Century Communities’ wholly owned subsidiaries, Inspire Home Loans Inc. and Parkway Financial Group LLC, which provide mortgage and title services to its home buyers, respectively, have been identified as its Financial Services operating segment.

Century Communities builds and sells an extensive range of home types across a variety of price points. Its emphasis is on acquiring well located land positions and offering quality homes with innovative design elements. The core of its business plan is to acquire and develop land strategically, based on its understanding of population growth patterns, entitlement restrictions and infrastructure development. Century Communities focuses on locations within its markets with convenient access to metropolitan areas that are generally characterized by diverse economic and employment bases and demographics and increasing populations. Century Communities believes these conditions create strong demand for new housing, and these locations represent what it believes to be attractive opportunities for long-term growth. Century Communities also seeks assets that have desirable characteristics, such as good access to major job centers, schools, shopping, recreation and transportation facilities, and it strives to offer a broad spectrum of product types in these locations. Product development and customer service are key components of the lifestyle connection Century Communities seeks to establish with each individual homebuyer. Century Communities’ construction expertise across an extensive product offering allows it flexibility to pursue a wide array of land acquisition opportunities and appeal to a broad range of potential homebuyers, from entry-level to first- and second-time move-up buyers and lifestyle homebuyers. Additionally, Century Communities believes its diversified product strategy enables it to adapt quickly to changing market conditions and to optimize returns while strategically reducing portfolio risk.

During the year ended December 31, 2016, Century Communities delivered 2,825 homes, with an average sales price of $346.5 thousand. During the same period, it generated approximately $978.7 million in home sales revenue, approximately $73.1 million in income before tax expense, and approximately $49.5 million in net income. For the year ended December 31, 2016, Century Communities’ net new home contracts totaled 2,860 homes, a 21.4% increase over the same period in 2015. On December 31, 2016, Century Communities had a backlog of 749 sold but unclosed homes, consisting of approximately $302.8 million in sales value, a 11.7% increase over the same period in 2015. Its results of operations are significantly impacted by its acquisitions of Peachtree Communities Group, Inc. and its affiliates and subsidiaries in November 2014, Grand View Builders in August 2014, and Las Vegas Land Holdings, LLC in April 2014. Subsequent to the acquisitions, these operations became Century Communities’ Atlanta, Houston and Nevada operating segments, respectively.

During 2016, Century Communities also invested for future growth through (i) its entrance into the Utah and North Carolina markets, (ii) commencing its wholly-owned financing operations, Parkway Financial Group, and (iii) acquiring a 50% ownership in Wade Jurney Homes. Century Communities also continued to expand its future pipeline of land positions as it increased its total lots owned and under control from 13,160 as of December 31, 2015 to 18,296 as of December 31, 2016.

Century Communities’ principal executive offices are located at 8390 East Crescent Parkway, Suite 650, Greenwood Village, Colorado 80111. Its main telephone number is (303) 770-8300.

 

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UCP, Inc.

UCP is a homebuilder and land developer with expertise in residential land acquisition, development and entitlement, as well as home design, construction and sales. UCP operates in the states of California, Washington, North Carolina, South Carolina and Tennessee. UCP designs, constructs and sells high quality single-family homes through Benchmark Communities, LLC (which we refer to as “Benchmark Communities”), its wholly owned homebuilding subsidiary. Prior to completion of its IPO, UCP operated as a wholly owned subsidiary of PICO Holdings, Inc., a NASDAQ-listed, diversified holding company. Subsequent to UCP’s IPO, PICO holds a majority of the voting power of UCP, Inc. and of the economic interests of UCP, LLC, the subsidiary through which UCP operates its business under the name UCP.

UCP has segmented its operating activities into two geographical regions and currently has homebuilding reportable segments and land development reportable segments in the West and Southeast.

In California, UCP primarily operates in the Central Valley area (Fresno and Madera counties), the Monterey Bay area (Monterey County), the South San Francisco Bay area (Santa Clara and San Benito counties) and in Southern California (Los Angeles, Ventura and Kern counties). In Washington State, it operates in the Puget Sound area (King, Snohomish, Thurston and Kitsap counties). In North Carolina, it operates in the Charlotte and Raleigh areas (Mecklenburg, Iredell, Union, Chatham counties). In South Carolina, UCP operates in the Myrtle Beach area (Horry County). In Tennessee, it operates in the Nashville area (Davidson, Rutherford, Wilson and Sumner counties).

UCP believes that these markets have attractive residential real estate investment characteristics, such as favorable long-term population demographics, consumer demand for single-family housing that often exceeds available supply, large and growing employment bases, and the ability to generate above-average investment returns. It continues to experience significant homebuilding and land development opportunities in its current markets and is evaluating potential expansion opportunities in other markets that it believes have attractive long-term investment characteristics.

UCP actively sources, evaluates and acquires land for residential real estate development and homebuilding. For each of its real estate assets, it periodically analyzes ways to maximize value by either (i) building single-family homes and marketing them for sale under its Benchmark Communities brand or (ii) completing entitlement work and horizontal infrastructure development and selling lots to third-party homebuilders. It performs this analysis using a disciplined analytical process, which UCP believes is a differentiating component of its business strategy.

UCP builds homes through its wholly owned homebuilding subsidiary, Benchmark Communities, LLC. Benchmark Communities operates under the principle that “Everything Matters!” This principle underlies all phases of UCP’s new home sale and construction process including planning, design, construction, marketing, sales and the customer experience. UCP is diversified by product offering, which it believes reduces its exposure to any particular market or customer segment. UCP decides to target specific and identifiable buyer segments by project and geographic market, in part dictated by each particular asset, its location, topography and competitive market positioning, and the amenities of the surrounding area and the community in which it is located.

UCP believes that its sizable inventory of well-located land provides it with a significant opportunity to develop communities and design, construct and sell homes under its Benchmark Communities brand. UCP expects that homebuilding and home sales will constitute its primary means of generating revenue growth for the foreseeable future.

UCP’s principal executive offices are located at 99 Almaden Boulevard, Suite 400, San Jose, California 95113. Its telephone number is (408) 207-9499.

 

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Merger Sub

Casa Acquisition Corp., a wholly-owned subsidiary of Century Communities, is a Delaware corporation that was formed on April 7, 2017 for the sole purpose of effecting the Merger. In the Merger, UCP will be merged with and into Merger Sub, with Merger Sub surviving the Merger. As a result of the Merger, Merger Sub, together with the legacy business and subsidiaries of UCP, will become direct and indirect wholly-owned subsidiaries of Century Communities.

Merger Sub’s principal executive offices and its telephone number are the same as those of Century Communities.

 

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UCP SPECIAL MEETING

UCP is providing this proxy statement/prospectus to its stockholders in connection with the solicitation of proxies to be voted at the UCP special meeting (or any adjournment or postponement of the UCP special meeting). This proxy statement/prospectus contains important information for you to consider when deciding how and whether to vote on the matters brought before the UCP special meeting. Please read it carefully and in its entirety.

Date, Time and Location

The date, time and place of the UCP special meeting are set forth below:

Date:                         , 2017

Time:                 a.m., local time

Place:                                 

Purpose

At the UCP special meeting, UCP stockholders will vote on:

 

    Proposal I: a proposal to adopt the Merger Agreement, pursuant to which UCP will merge with and into Merger Sub, with Merger Sub continuing as the surviving corporation in such Merger, such that the separate corporate existence of UCP will cease to exist, UCP no longer will be a publicly traded company, and the legacy business and subsidiaries of UCP, will become direct and indirect wholly-owned subsidiaries of Century Communities; and

 

    Proposal II: the adjournment proposal.

The adoption by UCP stockholders of the Merger Agreement is a condition to the obligations of Century Communities and of UCP to complete the Merger. The approval of the adjournment proposal is not a condition to the obligations of Century Communities or of UCP to complete the Merger.

Recommendation of the UCP Board of Directors

In evaluating the Merger and other transactions contemplated by the Merger Agreement, the UCP Board consulted with UCP senior management and UCP’s outside legal counsel and financial advisor. After consideration, the UCP Board, at a meeting duly held on April 10, 2017, at which all of the members of the UCP Board were present, unanimously determined that the Merger Agreement and the other transactions contemplated by the Merger Agreement, including the Merger, are fair to, and in the best interests of, UCP and its stockholders, and approved and declared advisable the Merger Agreement and the other transactions contemplated by the Merger Agreement, including the proposed Merger. For more information regarding the factors considered by the UCP Board in reaching its decision to approve the Merger Agreement and the transactions contemplated by the Merger Agreement, see “Proposal I: Adoption of the Merger Agreement—UCP’s Reasons for the Merger; Recommendation of the UCP Board of Directors” beginning on page 70 of this proxy statement/prospectus.

The UCP Board recommends that UCP stockholders vote FOR the adoption of the Merger Agreement and FOR the adjournment proposal.

Record Date; Outstanding Shares; Stockholders Entitled to Vote

UCP has two classes of voting stock issued and outstanding, the UCP Class A Common Stock and the UCP Class B Common Stock, which generally vote together as a single class on all matters presented to UCP stockholders for their vote or approval.

 

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The UCP Board has fixed the close of business on                 , 2017 as the Record Date for determination of the UCP stockholders entitled to notice of, and to vote at, the UCP special meeting or any adjournment or postponement thereof. Only UCP stockholders of record on the Record Date are entitled to receive notice of, and to vote at, the UCP special meeting or any adjournment or postponement thereof.

As of the Record Date, there were                 shares of UCP Class A Common Stock outstanding and entitled to vote at the UCP special meeting, held by approximately          holders of record, and there were 100 shares of UCP Class B Common Stock outstanding and entitled to vote at the UCP special meeting, held by one holder of record (PICO). With respect to each matter to be acted upon at the UCP special meeting, each holder of UCP Class A Common Stock is entitled to one vote for each outstanding share of UCP Class A Common Stock held by such holder, and each holder of UCP Class B Common Stock is entitled to, without regard to the number of outstanding shares of UCP Class B Common Stock held by such holder, a number of votes equal to the number of Series A Units of UCP, LLC held by such holder, multiplied by the Exchange Rate. As of the Record Date, the sole holder of record of all outstanding shares of UCP Class B Common Stock is PICO, and PICO holds 10,593,000 Series A Units of UCP, LLC, which are exchangeable for 10,401,722 shares of UCP Class A Common Stock.

A list of stockholders entitled to vote at the UCP special meeting will be available for examination by any stockholder for any purpose germane to the UCP special meeting beginning ten days prior to the UCP special meeting between the hours of 10:00 a.m. and 5:00 p.m., local time, at 99 Almaden Boulevard, Suite 400, San Jose, California 95113, UCP’s principal place of business, and ending on the date of the UCP special meeting, and such list will also be available at the UCP special meeting during the duration of the meeting.

Quorum

A quorum of outstanding shares is necessary to take action at the UCP special meeting. The presence in person or by proxy of the holders of UCP Common Stock having a majority of the votes which could be cast by the holders of all outstanding classes of stock entitled to vote at the UCP special meeting will constitute a quorum at the UCP special meeting.

If a holder of UCP Class A Common Stock is a beneficial owner of shares held in “street name” by a bank, broker, trust company or other nominee and does not provide the organization that holds its shares with specific voting instructions, then, under applicable rules, the organization that holds its shares may generally vote on “routine” matters but cannot vote on “non-routine” matters. If the organizations that holds its shares does not receive instructions from such UCP stockholder on how to vote its shares on a non-routine matter, that bank, broker, trust company or other nominee will inform the inspector of election at the UCP special meeting that it does not have authority to vote on the matter with respect to such shares. This is generally referred to as a “broker non-vote.” Abstentions and broker non-votes will be included in the calculation of the number of shares of UCP Common Stock represented at the UCP special meeting for purposes of determining whether a quorum has been achieved. However, if a beneficial owner of UCP Class A Common Stock does not instruct its broker, bank, trust company or other nominee how to vote on any matter, the broker, bank, trust company or other nominee will not have discretion to vote on any proposal at the UCP special meeting and such shares will not be deemed to be in attendance at the meeting or counted for purposes of determining whether a quorum has been achieved.

 

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Required Vote

The required number of votes to approve the matters to be voted upon at the UCP special meeting depends on the particular item to be voted upon as set out below:

 

    

Item

  

Vote Necessary for Approval*

Proposal I

   Adoption of the Merger Agreement    Approval requires the affirmative vote, in person or by proxy, of holders of a majority of the voting power of the outstanding shares of UCP Class A Common Stock and UCP Class B Common Stock, voting together as a single class.

Proposal II

   Adjournment of UCP Special Meeting (if Necessary or Appropriate)    Approval requires the affirmative vote, in person or by proxy, of holders of a majority of the votes which could be cast by the holders of all classes of stock entitled to vote on such question which are present in person or by proxy at the meeting.

 

* Under the rules of the NYSE, if you hold your shares of UCP Common Stock in street name, your nominee or intermediary may not vote your shares without instructions from you. If you do not provide voting instructions on any Proposal, your shares will not be deemed in attendance at the UCP special meeting and will not be voted. If you provide voting instructions on one Proposal but not the other Proposal, a broker non-vote will occur with respect to whichever Proposal you did not provide voting instructions for. Abstentions will have the same effect as a vote against the applicable Proposal. Shares deemed not in attendance at the meeting, whether due to a record holder’s failure to vote in person or by proxy or a “street name” holder’s failure to provide any voting instructions to such holder’s nominee or intermediary, and broker non-votes will have the same effect as a vote against Proposal I but will have no effect on Proposal II.

Share Ownership of and Voting by UCP Directors and Executive Officers

At the Record Date, UCP’s directors and executive officers and their affiliates (other than PICO, UCP’s majority stockholder) beneficially owned and had the right to vote an aggregate of             shares of UCP Class A Common Stock and no shares of UCP Class B Common Stock at the UCP special meeting, which represents     % of the voting power of the outstanding shares of UCP Common Stock entitled to vote at the UCP special meeting.

Two members of the UCP Board, Eric H. Speron and Maxim C.W. Webb, are members of the board of directors of PICO (and Mr. Webb is also the President and Chief Executive Officer of PICO), and may be deemed to share voting power and investment control over the shares of UCP Class B Common Stock owned by PICO. Messrs. Speron and Webb disclaim beneficial ownership of the shares of UCP Class B Common Stock owned by PICO except to the extent of any pecuniary interest therein. The 100 shares of UCP Class B Common Stock owned by PICO are entitled to approximately 57% of the voting power of the outstanding shares of UCP Common Stock entitled to vote at the UCP special meeting.

It is expected that UCP’s directors and executive officers and PICO will vote their respective shares FOR the adoption of the Merger Agreement and FOR the adjournment proposal. For more information regarding PICO’s obligations to vote its shares of UCP capital stock pursuant to the Voting Agreement, see “The Voting Agreement” beginning on page 120 of this proxy statement/prospectus.

Voting of Shares

If your shares of UCP Common Stock are registered directly in your name with Computershare Trust Company, N.A., UCP’s transfer agent and registrar, then you are considered to be the stockholder “of record”

 

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with respect to those shares. You may specify whether your shares should be voted for or against, or whether you abstain from voting with respect to, the proposal to adopt the Merger Agreement and the adjournment proposal.

You may attend the UCP special meeting and vote your shares in person or you may submit a proxy by any of the following methods:

 

    By Mail. If you choose to submit a proxy to vote by mail, simply complete the enclosed proxy card, date and sign it, and return it in the postage-paid envelope provided. Your shares will be voted in accordance with the instructions on your proxy card. If you sign your proxy card and return it without marking any voting instructions, your shares will be voted FOR the proposal to adopt the Merger Agreement, FOR the adjournment proposal, and in the discretion of the persons named as proxies on all other matters that may properly come before the UCP special meeting or any adjournment or postponement of the UCP special meeting.

 

    By Telephone. You may submit a proxy to vote your shares by telephone by calling the toll-free number provided on your proxy card any time up to 11:59 p.m. Eastern Time on                 , 2017. If you vote by telephone, you should not return your proxy card.

 

    Through the Internet. You may also submit a proxy to vote through the Internet by signing on to the website identified on your proxy card and following the procedures described in the website any time up to 11:59 p.m. Eastern Time on                 , 2017. If you vote by Internet, you should not return your proxy card.

If you are a beneficial owner and hold your shares in street name, or through a nominee or intermediary, such as a bank or broker, you will receive separate instructions from such nominee or intermediary describing how to vote your shares. The availability of telephonic or Internet voting will depend on the intermediary’s voting process. Please check with your nominee or intermediary and follow the voting instructions provided by your nominee or intermediary with these materials.

Your vote is very important. Whether or not you plan to attend the UCP special meeting, please act promptly to vote your shares with respect to the proposals described above. You may vote your shares by completing, signing and dating the enclosed proxy card and returning it in the postage-paid envelope provided. You also may vote your shares by telephone or through the Internet by following the instructions set forth on the proxy card. If you attend the UCP special meeting, you may vote your shares in person, even if you have previously submitted a proxy in writing, by telephone or through the Internet. If your shares are held in the name of a nominee or intermediary, please follow the instructions on the voting instruction card furnished by such record holder.

Revocability of Proxies; Changing Your Vote

You may revoke your proxy or change your vote at any time before your shares are voted at the UCP special meeting by:

 

    sending a signed written notice stating that you revoke your proxy to the Secretary, at UCP’s offices at 99 Almaden Boulevard, Suite 400, San Jose, California 95113, Attention: Secretary, that bears a later date than the date of the proxy you want to revoke and is received by the UCP Secretary prior to the applicable special meeting;

 

    submitting a valid, later-dated proxy via mail, over the telephone or through the Internet; or

 

    attending the UCP special meeting (or if the UCP special meeting is adjourned or postponed, attending the adjourned or postponed meeting) and voting in person, which will automatically cancel any proxy previously given, or revoking your proxy in person, but your attendance alone will not constitute a vote or revoke any proxy previously given.

 

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Beneficial owners who hold their UCP Common Stock in street name cannot revoke their proxies in person at the UCP special meeting because the UCP stockholders of record who have the right to cast the votes will not be present. If beneficial owners of UCP Common Stock wish to change their votes after returning voting instructions, they should contact their bank, broker or other agent before the UCP special meeting to determine whether they can do so.

Solicitation of Proxies; Expenses of Solicitation

This proxy statement/prospectus is being provided to UCP stockholders in connection with the solicitation of proxies by the UCP Board to be voted at the UCP special meeting and at any adjournments or postponements of the UCP special meeting. UCP will bear all costs and expenses in connection with the solicitation of proxies for the UCP special meeting, except that Century Communities and UCP will each pay 50% of the costs of filing, printing and mailing this proxy statement/prospectus. UCP has engaged MacKenzie Partners, Inc. to assist in the distribution and solicitation of proxies for the UCP special meeting and will pay MacKenzie Partners, Inc. a fee of approximately $9,000, plus reimbursement of reasonable expenses, for these services.

UCP is making this solicitation by mail, but UCP’s directors, officers and employees also may solicit by mail, telephone, facsimile, electronic transmission, personal interview or otherwise. Such directors, officers and employees will not receive additional compensation, but may be reimbursed by UCP for out-of-pocket expenses in connection with such solicitation. UCP will reimburse brokerage firms and other custodians, nominees and fiduciaries for their reasonable expenses incurred in sending proxies and proxy materials to beneficial owners.

Householding

UCP has not instituted householding for stockholders of record. However, certain brokerage firms may have instituted householding for beneficial owners of shares of UCP Common Stock held through brokerage firms. If your household has multiple accounts holding shares of UCP Common Stock, you may have already received householding notification from your broker. Please contact your broker directly if you have any questions or require additional copies of this proxy statement/prospectus. The broker will arrange for delivery of a separate copy of this proxy statement/prospectus promptly upon your request. UCP stockholders may decide at any time to revoke a decision to household, and thereby receive multiple copies.

Adjournment

The UCP special meeting may be adjourned from time to time to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and place, if any, thereof and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken. At the adjourned UCP special meeting, any business may be transacted that might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, notice of the adjourned meeting in accordance with the UCP Bylaws must be given to each stockholder of record entitled to vote at the meeting. If after the adjournment a new record date for determination of stockholders entitled to vote is fixed for the adjourned meeting, the UCP Board will fix as the record date for determining UCP stockholders entitled to notice of such adjourned UCP special meeting the same or an earlier date as that fixed for determination of UCP stockholders entitled to vote at the adjourned meeting, and will give notice of the adjourned UCP special meeting to each UCP stockholder of record as of the record date so fixed for notice of such adjourned UCP special meeting. All proxies will be voted in the same manner as they would have been voted at the original convening of the UCP special meeting, except for any proxies that have been effectively revoked or withdrawn prior to the time the proxy is voted at the reconvened meeting.

Tabulation of Votes; Methods of Voting; Results

UCP will retain an independent party,                 , to receive and tabulate the proxies, and to serve as the inspector of election to certify the results of the UCP special meeting.

 

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Other Information

The matters to be considered at the UCP special meeting are of great importance to UCP stockholders. Accordingly, you are urged to read and carefully consider the information contained in or incorporated by reference into this proxy statement/prospectus and complete, date, sign and promptly return the enclosed proxy card in the postage-paid envelope provided. You may also vote your shares by telephone or through the Internet. If you submit your proxy by telephone or through the Internet, you do not need to return the enclosed proxy card.

Assistance; Proxy Solicitor

If you need assistance in completing your proxy card or have questions regarding the UCP special meeting, please contact:

 

LOGO

105 Madison Avenue

New York, New York 10016

Telephone: (800) 322-2885

Email: proxy@mackenziepartners.com

or

UCP, Inc.

99 Almaden Boulevard, Suite 400

San Jose, California 95113

Attention: Investor Relations

Email: Investorrelations@unioncommunityllc.com

Telephone: (408) 207-9499 Ext. 476

 

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PROPOSAL I: ADOPTION OF THE MERGER AGREEMENT

General

This proxy statement/prospectus is being provided to UCP stockholders in connection with the solicitation of proxies by the UCP Board to be voted at the UCP special meeting and at any adjournments or postponements of the UCP special meeting. At the UCP special meeting, UCP will ask its stockholders to vote to (i) adopt the Merger Agreement and (ii) approve the adjournment proposal.

The Merger will not be completed without the adoption of the Merger Agreement by UCP stockholders. A copy of the Merger Agreement is attached as Annex A to this proxy statement/prospectus. You are urged to read the Merger Agreement in its entirety because it is the legal document that governs the Merger. For additional information about the Merger Agreement, see “The Merger Agreement” beginning on page 103 of this proxy statement/prospectus.

Effects of the Merger

At the effective time of the Merger, UCP will merge with and into Merger Sub, a wholly-owned subsidiary of Century Communities that was formed for the sole purpose of effecting the Merger. Merger Sub will survive the Merger, and as a result of the Merger, Merger Sub, together with the legacy business and subsidiaries of UCP, will become direct and indirect wholly-owned subsidiaries of Century Communities.

At the effective time of the Merger, each outstanding share of UCP Class A Common Stock (other than dissenters’ shares or treasury shares held by UCP and any shares of UCP Class A Common Stock owned by any UCP subsidiary, Century Communities or Century Communities subsidiary) will be converted into the right to receive and become exchangeable for the Merger Consideration, with cash paid in lieu of fractional shares. Century Communities stockholders will continue to hold their existing shares of Century Communities Common Stock.

Background of the Merger

As part of its ongoing strategic planning process, the UCP Board regularly reviews and assesses UCP’s long-term strategic goals and opportunities, industry trends, competitive environment, and short- and long-term performance, with the goal of enhancing stockholder value. In connection with these activities, the UCP Board met from time to time in the ordinary course of business to consider and evaluate potential strategic alternatives, including business combinations, acquisitions, dispositions, stock buybacks, secondary sales of stock in the public markets and other potential transactions, as well as various operational strategies available to UCP. The UCP Board also reviewed and considered UCP’s share price and stockholder returns, both on an absolute basis and relative to UCP’s peers in the homebuilding sector, and potential risks that UCP faced in executing its strategic plan. These potential risks included UCP’s small market capitalization, lack of liquidity and trading volume, limited size and geographic footprint, including the effects of its limited size on overhead and other fixed costs, potentially unfavorable business environments with respect to the U.S. housing recovery and other factors.

In the spring of 2015, UCP received expressions of interest for a business combination transaction from two U.S. homebuilders, Century Communities and another party we refer to as Party A. In connection with the receipt of these proposals, in April 2015, UCP engaged Citi as UCP’s financial advisor. UCP’s Board engaged Citi as UCP’s financial advisor given Citi’s familiarity with UCP, as well as Citi’s experience and reputation advising public companies in business combination transactions generally and specifically in the homebuilding sector. In response to the expressions of interests by Century Communities and Party A, during the spring and summer of 2015, UCP, with the assistance of Citi, solicited indications of interest from 12 potential counterparties to a business combination (including Century Communities and Party A). The transaction candidates included a mix of potential strategic acquirors and financial sponsors. Of those 12 parties, 10 executed confidentiality

 

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agreements and received confidential information regarding UCP, four submitted preliminary indications of interest (which did not include Party A), two completed due diligence, and only one, Century Communities, submitted a preliminary, non-binding proposal to enter into a business combination with UCP. Century Communities’ 2015 proposal contemplated a mix of cash and stock at a fixed exchange ratio, implying a total value of approximately $10.00 per share of UCP Class A Common Stock based on the parties’ respective stock prices at the time.

In connection with this process, UCP and Century Communities entered into customary confidentiality and standstill agreements in February 2015 and March 2015, respectively, and UCP, Century Communities and PICO, UCP’s majority stockholder, entered into a second standstill agreement in October 2015. All of the confidentiality and/or standstill agreements with the other parties contacted during this period either have since expired or do not restrict the other party from making offers to acquire UCP after public announcement of a definitive merger agreement.

Throughout the rest of the summer and into the fall of 2015, UCP and Century Communities continued to discuss a potential business combination, including engaging in extensive due diligence with respect to each other’s businesses and preparation of draft transaction agreements by their respective outside law firms. Due to changes in the financing environment in the fall of 2015, fluctuations in the market price for each company’s respective stock and other factors, the parties were not, however, able to reach a definitive agreement on value, pro forma equity ownership and other material terms. Discussions between UCP and Century Communities regarding a potential business combination were terminated in October 2015. During this process, Century Communities expressed general interest in retaining certain members of UCP management following consummation of the proposed transaction, but no substantive discussions or negotiations with any members of UCP management regarding specific post-closing employment terms occurred.

In March 2016, Century Communities and UCP re-initiated discussions regarding a potential all-stock business combination transaction. In connection with these discussions, UCP, Century Communities and PICO entered into a second customary confidentiality agreement. Negotiations between Century Communities and UCP continued for approximately one month, during which time the parties again engaged in mutual due diligence reviews and preparation of draft transaction agreements by their respective law firms. Again, however, these discussions were abandoned in early April 2016 without the parties reaching a definitive agreement on value, pro forma equity ownership and other material terms for a business combination transaction. As of the termination of these discussions, Century Communities’ all-stock proposal implied a total value of approximately $6.58 per share of UCP Class A Common Stock. As in the 2015 process, Century Communities expressed general interest in retaining certain members of UCP management following consummation of the proposed transaction, but no substantive discussions or negotiations with any members of UCP management regarding specific post-closing employment terms occurred. UCP did not hold discussions with any other potential counterparties during the period of these 2016 discussions with Century Communities.

Through the remainder of 2016, there were no further discussions regarding a potential business combination transaction between UCP and Century Communities or any other party, although representatives of UCP spoke from time to time with representatives of Century Communities and other homebuilders to discuss general market and industry conditions and similar issues affecting their respective businesses. During this period, the UCP Board and management team resumed their focus on executing UCP’s standalone business plan.

On January 25 and 26, 2017, the UCP Board held a regularly scheduled meeting. Among other business conducted at that meeting, and in light of improvements in UCP’s operations and financial performance, the UCP Board and management initiated a review of and discussed with UCP’s financial advisors potential strategic alternatives for UCP, including various risks and benefits of continuing to execute UCP’s business plan as a standalone public company, issuing additional equity in secondary market transactions, potential acquisition opportunities to expand UCP’s national footprint and build scale and potential business combination transactions. During this meeting, the members of the UCP Board, together with representatives of UCP’s management and

 

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Citi, discussed UCP’s 2015 and 2016 efforts to pursue a business combination transaction and whether any of the parties previously contacted were likely to remain interested in discussing a potential business combination transaction with UCP. At the conclusion of these discussions, the UCP Board directed management to contact representatives of likely potential counterparties to a business combination transaction to gauge such parties’ respective interest in participating in such a process and to update the UCP Board at its next regularly scheduled meeting to be held on February 28, 2017. The UCP Board gave this direction to assess the likelihood of success of a new, comprehensive process before authorizing UCP to invest time and financial resources in a formal process.

Subsequent to the January 25 and 26 UCP Board meeting, Mr. Bogue spoke by phone with a representative of Party A, during which they discussed a variety of matters meaningful to their respective companies, including general market and industry conditions and homebuilder mergers and acquisitions activity. During this conversation, the representative of Party A informed Mr. Bogue that Party A could be interested in discussing a potential business combination transaction with UCP at a future time, but that Party A would not be able to pursue such a transaction with UCP in the near term.

On February 13, 2017, Dustin L. Bogue, UCP’s President and Chief Executive Officer, held a telephone conversation with Dale Francescon, Century Communities’ Chairman and Co-Chief Executive Officer, and Robert Francescon, Century Communities’ Co-Chief Executive Officer, during which they discussed a variety of matters important to their respective companies, including general market and industry conditions and macroeconomic trends, including homebuilder mergers and acquisitions activity, proposed legislation affecting the California homebuilding industry, and similar issues. During the course of this conversation, Mr. Francescon asked if UCP and Century Communities should consider amending the February 2015 confidentiality agreement, which had expired in accordance with its terms on February 9, 2016, to facilitate further continued discussions. At this time, UCP, Century Communities and PICO remained bound until September 2017 by the March 2016 confidentiality agreement.

On February 18, 2017, UCP and Century Communities amended their February 2015 confidentiality agreement so that it would remain in full force and effect from its original execution through June 1, 2017.

Messrs. Bogue and Francescon spoke again by phone on February 23, 2017. During their conversation, Mr. Francescon informed Mr. Bogue that Century Communities would be interested in resuming discussions regarding a potential business combination transaction in light of a number of similarities between the two companies, including with respect to geographic footprint, product alignment and existing corporate cultures. They also discussed certain non-public financial information and internal forecasts of each of their respective companies, although they did not discuss the potential financial or other terms for a potential transaction between their companies or a timeframe for completing any such potential transaction. At the conclusion of this conversation, Messrs. Bogue and Francescon relayed to each other that they would inform the boards of directors of their respective companies of this discussion and obtain further directions.

The UCP Board met as scheduled on February 28, 2017. Among other business conducted at the meeting, Mr. Bogue reported on his discussions with Mr. Francescon since the last UCP Board meeting, including Mr. Francescon’s indication on February 23, 2017, that Century Communities remained interested in conducting further discussions with UCP regarding a potential business combination transaction. Following further discussion, including discussion of the potential risks and merits of a business combination transaction, the UCP Board directed Mr. Bogue to inform Mr. Francescon that the UCP Board would be willing to consider a preliminary proposal for a business combination transaction from Century Communities, provided that any proposal would have to be higher than what had previously been offered by Century Communities in either 2015 or 2016 to reflect the operational improvements that had been made by UCP since then.

The following day, March 1, 2017, Mr. Bogue spoke with Mr. Francescon and relayed the UCP Board’s message.

 

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On March 6, 2017, Century Communities delivered a written, non-binding preliminary proposal outlining a potential business combination transaction between Century Communities and UCP. Among other things, Century Communities’ March 6 preliminary proposal contemplated UCP’s stockholders receiving 0.244 of a share of Century Communities Common Stock plus $5.00 in cash per share of UCP Class A Common Stock. As noted in Century Communities’ preliminary proposal, based on Century Communities’ and UCP’s respective closing stock prices on the NYSE on March 6, the implied total value of the stock and cash consideration was approximately $10.75 per share of UCP Class A Common Stock. Century Communities’ preliminary proposal further contemplated (1) as a condition to consummation of the proposed transaction, the exchange of PICO’s interest in UCP, LLC for shares of UCP Class A Common Stock, (2) that Century Communities had sufficient cash on hand and immediate borrowing capacity under its existing credit facility to complete the transaction without a financing condition and (3) a period of three to four weeks to conduct further due diligence on UCP.

Mr. Bogue promptly forwarded Century Communities’ March 6 preliminary proposal to the UCP Board and UCP’s advisors, and the UCP Board scheduled a meeting for March 10, 2017, to discuss the preliminary proposal.

On March 10, 2017, the UCP Board, together with representatives of UCP’s management, Citi and Sidley Austin LLP (which we refer to as “Sidley”), UCP’s regular outside counsel, in attendance, met to consider Century Communities’ March 6 proposal. During the course of this meeting, the attendees first received a presentation from management reviewing the directors’ consideration of strategic alternatives to date, including the proposed transactions with Century Communities in 2015 and 2016, the outreach and other solicitation efforts undertaken in 2015 with respect to potential merger and acquisition transaction candidates other than Century Communities, and other potential strategic and financial alternatives that UCP had considered but determined not to pursue. Citi discussed with the UCP Board certain financial aspects of Century Communities’ March 6 proposal, including the fact that, due to changes in the companies’ respective stock prices in the intervening days, Century Communities’ proposal represented an implied total value of approximately $10.95 per share of UCP Class A Common Stock. The Sidley representatives discussed certain legal aspects of the March 6 proposal, including the likely U.S. federal income tax treatment of the proposed merger consideration to UCP’s stockholders, the fact that the number of shares of Century Communities Common Stock to be issued as merger consideration based on the proposed exchange ratio would require Century Communities to obtain stockholder approval under the NYSE listing rules and the risk to deal certainty that a Century Communities stockholder approval condition could create for the proposed transaction. In connection with these discussions, the UCP Board also discussed with UCP’s management and outside advisors the effects a new transaction process or publicly announced definitive merger agreement could have on UCP’s ongoing efforts to refinance its outstanding 8.5% Senior Notes due October 21, 2017 (which we refer to in this proxy/registration statement as the 2017 Notes). Specifically, it was noted that any new, replacement facility entered into to refinance the 2017 Notes before their maturity would likely include “make whole” or other early repayment provisions that could impose significant costs on consummating a business combination shortly thereafter, potentially impeding UCP’s ability to reach a definitive merger agreement with any party or reducing the merger consideration available to UCP’s stockholders pursuant to any such definitive merger agreement. It was further noted that if UCP did not take steps to refinance the 2017 Notes sufficiently in advance of their maturity, then a failure to reach a definitive merger agreement or the termination of a definitive merger agreement without closing the contemplated transaction could severely limit UCP’s ability to refinance the 2017 Notes on commercially acceptable terms before their maturity. After further discussion, the UCP Board determined that, while Century Communities’ March 6 preliminary proposal was inadequate from a financial standpoint and that accepting it in its current form would not be in the best interests of UCP and its stockholders, it was sufficiently attractive to warrant continued discussions and negotiations with Century Communities regarding a potential business combination transaction. In this regard, the UCP Board directed UCP’s management and advisors to inform Century Communities that a transaction requiring the approval of Century Communities’ stockholders was not acceptable to UCP. Given Century Communities’ proposed timeframe to complete a due diligence review and overall desire to proceed expeditiously to a definitive agreement, UCP’s management and advisors were also directed to request that any definitive agreement with Century Communities include a “go-shop” provision permitting UCP to solicit

 

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superior proposals after signing and publicly announcing a definitive agreement. During the meeting, the UCP Board also discussed engaging, and ultimately engaged, Paul, Weiss as special legal counsel in connection with the proposed transaction. The UCP Board determined to engage Paul, Weiss based on its experience, qualifications and reputation in advising public companies in transactions of the kind contemplated by Century Communities’ March 6 preliminary proposal, and its familiarity with UCP following its representation of the special committee of the UCP Board in connection with its consideration of various amendments to UCP’s certificate of incorporation and bylaws proposed by PICO. (For more information regarding these proposed amendments, see the Current Report on Form 8-K filed by UCP with the U.S. Securities and Exchange Commission on March 30, 2017.)

Following the March 10 UCP Board meeting and in accordance with the UCP Board’s directions, representatives of UCP management and Citi informed representatives of Century Communities and J.P. Morgan Securities LLC (which we refer to in this proxy statement/prospectus as J.P. Morgan), financial advisor to Century Communities, of the UCP Board’s determinations.

On March 13, 2017, in light of Century Communities’ general expression of interest in retaining certain members of UCP management following the proposed transactions discussed in 2015 and 2016, Mr. Bogue called Mr. Dale Francescon preemptively to inform him that neither Mr. Bogue nor any other officer or employee of UCP would be permitted to hold any discussions with representatives of Century Communities about their personal, post-transaction employment until expressly authorized to do so by the UCP Board. During this conversation, Mr. Francescon indicated to Mr. Bogue that a key potential risk to a transaction from Century Communities’ perspective was a bill introduced and pending in the California legislature, Assembly Bill No. 199, that if enacted could make homebuilding operations in California more costly, in turn materially undermining the value proposition to a business combination with UCP in view of UCP’s significant presence in the California homebuilding market.

Also on March 13, representatives of Paul, Weiss and representatives of Greenberg Traurig, Century Communities’ outside legal counsel, held a conference call to discuss various preliminary transaction process issues, including amending the March 2016 confidentiality agreement and March 2015 and October 2015 standstill agreements to extend their respective terms through March 2018. Also during this call, the representatives of Greenberg Traurig informed the representatives of Paul, Weiss that Century Communities would not agree to a go-shop provision in the merger agreement. The Greenberg Traurig representatives stated that, in view of the approximately four-week mutual due diligence process anticipated by Century Communities and the fact that Century Communities had not, in connection with its business combination proposal, requested an exclusivity period for negotiating the terms of a proposed transaction, UCP was unrestricted in its ability to conduct any pre-signing market check process it thought was appropriate under the circumstances.

On March 14, 2017, amendments to the March 2016 confidentiality agreement and March 2015 and October 2015 standstill agreements were entered into by UCP, Century Communities and PICO, as applicable, and on March 15, 2017, each of Century Communities and UCP made their respective virtual data rooms available to each other’s representatives. The parties, through their representatives, continued to perform mutual due diligence reviews on each other, including making from time to time supplemental due diligence requests up to the execution and delivery of the definitive merger agreement on April 10, 2017.

On the morning of March 16, 2017, the UCP Board held a meeting, with representatives of UCP’s management, Citi and Paul, Weiss in attendance, to discuss developments over the preceding days regarding discussions with Century Communities, including Century Communities’ concern over pending Assembly Bill No. 199 and the fact that Century Communities would not agree to a go-shop provision in the merger agreement. The representatives of Paul, Weiss provided a detailed overview of the UCP directors’ fiduciary duties and legal standards applicable to their decisions and actions with respect to their evaluation of the proposed business combination transaction and answered questions regarding certain expected terms of the draft merger agreement based on Century Communities’ March 6 preliminary proposal. These included UCP’s ability to respond to,

 

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engage in discussions and become fully informed with respect to unsolicited proposals from third parties that constituted or were reasonably expected to lead to a superior proposal following signing of a definitive merger agreement in the absence of a go-shop provision and the steps the UCP Board could take before signing to seek to obtain the best offer reasonably available. At this meeting, the UCP Board also established a special transaction committee of the UCP Board (which we refer to in this proxy statement/prospectus as the transaction committee) empowered to oversee day-to-day developments regarding the transaction process and comprised entirely of directors able to convene on short notice and dedicate significant time to this task, provided, that all members of the UCP Board would be and ultimately were invited to attend all meetings of the transaction committee. The UCP Board appointed Michael C. Cortney (Chairman of the UCP Board), Maxim C.W. Webb (a member of the UCP Board and PICO’s chief executive officer) and Mr. Bogue to the transaction committee.

The UCP Board discussed a number of other transaction-related matters at its March 16 meeting, including, with input from UCP’s management, Citi and Paul, Weiss, various options for conducting a pre-signing market check, related costs and benefits of each option, such as the timing necessary for a more targeted or comprehensive process, the risk of losing the Century Communities transaction option if a market check extended over a prolonged period, the possibility of employee attrition or loss of employee morale if it were to become public that UCP was marketing itself, the theoretical likelihood of finding through such a process a potential transaction candidate prepared to pay more in cash and/or stock value than Century Communities’ proposal taking into consideration UCP’s 2015 process and 2016 discussions with Century Communities, and the effect that the failure of reaching a definitive agreement in respect of a transaction could have on UCP’s ability to refinance the 2017 Notes by October 2017. Following discussion, the UCP Board determined to continue substantive discussions with Century Communities and directed Citi to commence a targeted pre-signing market check on behalf of UCP that included outreach to seven parties contacted by UCP during the 2015 process, plus an additional nine parties not previously contacted. The UCP Board determined not to contact four of the parties involved in the 2015 process because they either had solicited UCP employees in connection with that earlier process, and were deemed to pose a risk to UCP’s workforce, or were no longer likely to have the financial ability to complete a transaction with UCP. The additional nine parties included domestic and international potential counterparties that Citi had indicated had shown increased interest in acquisitions of U.S. homebuilding companies generally in recent months. Century Communities, plus the 16 contacted parties, represented those strategic acquirors and financial sponsors viewed as most likely to be interested in pursuing a transaction with UCP and to possess the financial resources and familiarity with the U.S. homebuilding sector reasonably necessary to complete a transaction. Also at this meeting, the UCP Board discussed with UCP’s management and advisors various options that might be available to UCP to refinance the 2017 Notes on a parallel track with the negotiations with Century Communities, including whether Century Communities would agree to a bridge or backstop facility to refinance the 2017 Notes if a definitive merger agreement could not be reached, or were entered into but subsequently terminated, and various other traditional and non-traditional financing sources that might be able to provide financing on commercially acceptable terms without jeopardizing the possibility of reaching a definitive merger agreement.

Following the March 16 UCP Board meeting and as directed by the UCP Board, representatives of Citi relayed to J.P. Morgan the UCP Board’s request that Century Communities consider providing a bridge or backstop facility to address the risks relating to the maturity of the 2017 Notes and reiterated the UCP Board’s request following its March 10 meeting that Century Communities revise the stock consideration component of its proposal to eliminate the need for Century Communities stockholder approval.

Later in the afternoon of March 16, Century Communities delivered a revised written, non-binding preliminary proposal. Century Communities’ March 16 preliminary proposal reduced the exchange ratio for the stock consideration to 0.2309 of a share of Century Communities Common Stock for each share of UCP Class A Common Stock, thereby reducing the number of shares Century Communities would have to issue to a level sufficient to avoid seeking Century Communities stockholder approval, and increased the cash consideration to $5.16 per share. Based on the companies’ respective closing stock prices on March 15, 2017, the last full trading day before delivery of Century Communities’ March 16 preliminary proposal, the revised proposal represented

 

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an implied total value of approximately $10.85 per share of UCP Class A Common Stock. In its March 16 preliminary proposal, Century Communities also declined to participate in any bridge or backstop financing arrangements with UCP.

On March 17, 2017, at the direction of the transaction committee, representatives of Citi contacted representatives of J.P. Morgan to inform them that, although Century Communities’ March 16 preliminary proposal provided greater transaction certainty to UCP by removing the requirement to seek Century Communities stockholder approval and reflected an increase in Century Communities’ March 6 preliminary proposal as of the time it was made, Century Communities’ March 16 preliminary proposal did not give effect to changes in the companies’ respective stock prices between March 6 and March 16 and that, as a result, the earlier March 6 preliminary proposal provided greater value to UCP stockholders than did the March 16 preliminary proposal. Later in the day on March 17, Century Communities sent a further revised written, non-binding preliminary proposal, which increased the cash portion of the proposed consideration to $5.32 per share while maintaining the exchange ratio for the stock consideration at 0.2309 of a share of Century Communities Common Stock per share of UCP Class A Common Stock. Based on the companies’ respective closing stock prices on March 17, Century Communities’ March 17 preliminary proposal represented an implied total value of approximately $11.17 per share of UCP Class A Common Stock. Century Communities’ March 17 preliminary proposal was forwarded to the transaction committee for its consideration and review.

Also on March 17, as directed by the UCP Board, Citi began to contact the 16 potential counterparties in addition to Century Communities identified by the UCP Board at its March 16 meeting as the most likely parties to engage in a potential business combination transaction with UCP. Over the following weeks, five of these parties (each of which was a potential strategic acquiror) entered into confidentiality agreements with UCP and subsequently received access to UCP’s virtual data room. We refer to these five parties in this proxy statement/prospectus as Party B, Party C, Party D, Party E and Party F. None of these confidentiality agreements included standstill provisions prohibiting the parties from making potentially superior proposals following UCP’s public announcement of a definitive merger agreement with another party.

On March 20, 2017, Greenberg Traurig sent a first draft of the merger agreement to Paul, Weiss. The draft merger agreement was based in many respects on the last draft merger agreement exchanged between the parties in connection with their negotiations in March/April 2016. Among other things, it contemplated a forward merger of UCP into a subsidiary of Century Communities, with the subsidiary (as the successor to UCP) continuing as a wholly owned subsidiary of Century Communities and with each outstanding share of UCP Class A Common Stock immediately prior to the consummation of the merger being converted into the right to receive $5.32 in cash and 0.2309 of a share of Century Communities Common Stock, consistent with Century Communities’ March 17 preliminary proposal. In addition, the draft merger agreement contemplated the exchange of all of PICO’s interests in UCP, LLC into shares of UCP Class A Common Stock immediately prior to the effective time of the merger pursuant to the terms of the existing Exchange Agreement between UCP and PICO entered into in July 2013 in connection with UCP’s initial public offering, generally reciprocal representations and warranties and interim operating covenants for the period between signing and closing, a customary non-solicitation covenant with a fiduciary out enabling the UCP Board to hold discussions with third party suitors in response to, and to terminate the merger agreement to accept, an unsolicited superior proposal, a termination fee payable by UCP to Century Communities if UCP terminated the merger agreement in certain circumstances (including to accept a superior proposal) in an amount equal to approximately 3.65% of the total equity value of the proposed transaction, and various customary closing conditions for a transaction of the size of the proposed transaction and with respect to companies in UCP and Century Communities’ industry. The draft merger agreement did not contain any financing conditions or requirement to obtain the approval of Century Communities’ stockholders.

Also on March 20, 2017, Greenberg Traurig sent a first draft of a voting support and transfer restriction agreement (which we refer to in this proxy statement/prospectus as the voting agreement) to PICO’s outside counsel, Cooley LLP (which we refer to in this proxy statement/prospectus as Cooley), and to Paul, Weiss. The

 

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first draft of the voting agreement contemplated, among other things, that PICO vote all of its shares in favor of the adoption of the merger agreement and approval of the merger, refrain from taking various actions that could prevent or delay the consummation of the merger, including restrictions on PICO’s ability to solicit alternative transactions generally consistent with the non-solicitation covenants in the draft merger agreement applicable to UCP, and restrictions on PICO’s ability to transfer shares of Century Communities Common Stock received as merger consideration for certain periods following the consummation of the merger. The draft voting agreement also would terminate upon the termination of the merger agreement, including if UCP terminated the voting agreement to accept a superior proposal. It did not, however, contemplate any termination of PICO’s obligation to vote all of its UCP shares in favor of the adoption of the merger agreement following a change of recommendation by the UCP Board not accompanied by a termination of the merger agreement.

On March 21, 2017, representatives of Cooley and Paul, Weiss held a conference call to discuss open issues in the draft voting agreement of mutual concern to their respective clients.

Later in the evening of March 21, Mr. Bogue briefed the other members of the transaction committee by email regarding recent developments with respect to the draft merger agreement, draft voting agreement and solicitation efforts to other potential counterparties. Representatives of Paul, Weiss also circulated their proposed revisions to the draft merger agreement to the transaction committee shortly thereafter.

On March 22, 2017, Paul, Weiss sent a revised draft of the merger agreement to Greenberg Traurig. Among other things, the revised draft of the merger agreement noted that the pricing terms of the proposed transaction remained subject to the parties’ continuing negotiation, revised the scope of and exceptions to certain of the parties’ respective representations and warranties, including to qualify certain representations and warranties by a material adverse effect standard, revised the definition of a material adverse effect to exclude any change in law relating to the California homebuilding industry (including pending Assembly Bill No. 199), revised the definitions of company takeover proposal and superior company proposal to broaden the circumstances in which UCP would be permitted to engage in discussions regarding or accept potentially superior proposals, revised the definition of intervening event, revised the definition of acceptable confidentiality agreement (applicable in connection with the exceptions to UCP’s non-solicitation covenants in the merger agreement), modified certain contractual procedures whereby the UCP Board would be permitted to change its recommendation of the merger agreement, reduced the termination fee to 3.25% of the proposed transaction’s equity value, modified certain provisions of the merger agreement regarding the remedies of the parties under certain circumstances, and narrowed the circumstances under which the termination fee would not be Century Communities’ sole and exclusive remedy following a termination of the merger agreement.

Also on March 22, Greenberg Traurig sent a revised draft of the voting agreement to Cooley and Paul, Weiss. Cooley and Paul, Weiss exchanged amongst themselves and their respective clients proposed edits to the voting agreement by email on March 22 and March 23, 2017.

On March 24, 2017, Cooley sent a revised draft of the voting agreement to Greenberg Traurig and Paul, Weiss. The revised draft of the voting agreement reflected input from Paul, Weiss. Among other things, it revised PICO’s non-solicitation covenant to permit PICO to engage in discussions regarding potential superior proposals to the same extent and under the same circumstances applicable to UCP in the merger agreement and provided that the voting agreement would terminate upon any change of recommendation by the UCP Board, whether due to a superior proposal or the occurrence of an intervening event.

Later in the day on March 24, Greenberg Traurig circulated a revised draft of the merger agreement to Paul, Weiss and a revised draft of the voting agreement to Cooley and Paul, Weiss. Among other things, the revised draft of the merger agreement reverted to the March 20 draft of the merger agreement with respect to the pricing terms, definition of superior company proposal, 3.65% termination fee and circumstances under which the termination fee would not be Century Communities’ sole and exclusive remedy following a termination of the merger agreement. With respect to the voting agreement, Greenberg Traurig’s March 24 revised draft

 

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contemplated that PICO’s obligation to vote all of its shares in favor of the adoption of the merger agreement would be reduced to an obligation to vote 38% of UCP’s outstanding voting power if the UCP Board changed its recommendation of the merger agreement due to the occurrence of an intervening event (that, by reason of a so-called “force-the-vote” covenant in the merger agreement solely in respect of an intervening event, did not permit UCP to terminate the merger agreement).

On March 27 and 28, 2017, representatives of UCP traveled to Las Vegas, Nevada and toured most of Century Communities’ Las Vegas properties as part of UCP’s due diligence review of Century Communities. The UCP representatives did not meet with any management or personnel from Century Communities during these tours other than salespersons in model homes.

On March 27, 2017, Party D informed representatives of Citi that Party D was withdrawing from the process and would not submit a preliminary proposal.

On March 28, 2017, in accordance with the UCP Board’s directions, Citi sent a process letter on behalf of UCP to the remaining parties still engaged in the process (other than Century Communities), requesting that they submit written, non-binding indications of interest by Friday, April 7, 2017. The process letter indicated that UCP expected to invite a limited group of parties to participate in a second phase of the transaction process following review of the preliminary proposals received by April 7.

On March 29, 2017, Party B, which until that point was the party furthest along in its due diligence review of UCP (including based on its participation in the 2015 process) other than Century Communities, informed representatives of Citi that it was withdrawing from the process and would not submit a preliminary proposal. Also on March 29, Messrs. Bogue and Francescon had a telephone call to discuss a number of issues relating to the proposed transaction, including the parties’ mutual due diligence reviews and site tours. During that phone call, Mr. Francescon also inquired into the status of the draft merger agreement and informed Mr. Bogue of Century Communities’ desire to proceed to final documentation as expeditiously as possible and that Century Communities was prepared to abandon discussions if there were any delays in that regard, including if any such delays related to UCP’s ongoing pre-signing market check process. Later that day, Paul, Weiss sent Greenberg Traurig an issues list of open items in the latest drafts of the merger agreement and voting agreement, including pricing terms of the proposed transaction, the size of the termination fee, certain exclusive remedies provisions of the merger agreement, certain conditions to Century Communities’ obligation to close, certain language regarding the exceptions to UCP’s non-solicitation covenants and related definitional changes, the definition of a superior company proposal, and the events causing a termination of the voting agreement, and scheduled a conference call for the following day to discuss these issues further.

On March 30, 2017, representatives of UCP’s and Century Communities’ respective management teams met in person to tour several of UCP’s California properties in Fresno and Monterey counties as part of Century Communities’ due diligence review of UCP. During these property tours, the UCP and Century Communities management teams also discussed various other aspects of the proposed transaction and mutual due diligence matters.

Also on March 30, as scheduled the day before, representatives of Paul, Weiss and Greenberg Traurig held a conference call to discuss Paul, Weiss’s issues list. During that call, the representatives of Greenberg Traurig informed the representatives of Paul, Weiss that the pricing terms in Century Communities’ March 17 preliminary proposal reflected its best and final offer, however Century Communities would accept a termination fee of 3.5% of the transaction’s total equity value and that it would compromise with respect to certain of Paul, Weiss’s proposed changes to the definition of a superior company proposal. In addition, the representatives of Paul, Weiss informed the representatives of Greenberg Traurig that UCP would not accept any conditionality to a definitive agreement based on any future enactment of Assembly Bill No. 199, and that Century Communities would have to determine prior to entering into a definitive agreement whether to accept the risk of changes in applicable laws. With respect to the draft voting agreement, the representatives of Greenberg Traurig stated that

 

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Century Communities would not agree to permit the voting agreement to terminate upon a change of recommendation of the UCP Board solely in respect of an intervening event and that reducing PICO’s voting commitment to 38% of UCP’s outstanding voting power was appropriate under the circumstances. Following this conference call, Paul, Weiss sent a revised draft of the merger agreement to Greenberg Traurig, reflecting the resolution of the open items in that agreement.

Later in the day on March 30, representatives of Cooley and Paul, Weiss discussed the open items in the voting agreement. During that discussion, the representative of Cooley informed Paul, Weiss that there were a handful of additional open items of concern to PICO, including that PICO was not prepared to agree to vote more than 28% of UCP’s outstanding voting power in favor of a merger agreement that the UCP Board no longer recommended by reason of the occurrence of an intervening event that did not permit UCP to terminate the merger agreement. In addition, PICO proposed additional post-closing covenants between PICO and Century Communities primarily relating to certain tax matters in respect of PICO’s interests in UCP, LLC prior to consummation of the merger.

On March 31, 2017, Cooley sent a revised draft of the voting agreement to Greenberg Traurig and Paul, Weiss, which reflected a reduction in PICO’s obligation to vote in favor of the adoption of the merger agreement following a change of recommendation by the UCP Board in the case of an intervening event to 28% of UCP’s outstanding voting power as well as the proposed post-closing covenants between PICO and Century Communities.

On April 2, 2017, Paul, Weiss sent a first draft of UCP’s confidential disclosure schedules to Greenberg Traurig.

The following day, April 3, 2017, Greenberg Traurig sent Paul, Weiss a first draft of Century Communities’ confidential disclosure schedules and sent Cooley and Paul, Weiss revised drafts of the merger agreement and voting agreement. The revisions to the draft merger agreement did not reflect any open material deal terms between the parties, and the revised draft of the voting agreement reflected the status of ongoing discussions between PICO and Century Communities regarding their post-closing covenants and increased PICO’s obligation to vote in favor of the merger agreement following a change of recommendation in respect of an intervening event to 30% of UCP’s outstanding voting power.

On April 4, 2017, representatives of Cooley and Greenberg Traurig held a conference call to discuss open issues in the draft voting agreement. Cooley sent a revised draft of the voting agreement to Greenberg Traurig and Paul, Weiss later that day, which continued to reflect open issues between PICO and Century Communities with respect to the post-closing covenants.

On April 5, 2017, representatives of Paul, Weiss and Greenberg Traurig held a conference call to discuss open issues in the parties’ draft confidential disclosure schedules relating to, among other things, the circumstances in which Century Communities would be permitted to incur new indebtedness between signing and closing and limitations on UCP’s ability to pay retention awards to employees between signing and closing as contemplated by the merger agreement. Later in the day, Paul, Weiss sent Greenberg Traurig a revised draft of Century Communities’ confidential disclosure schedules, and Greenberg Traurig sent Paul, Weiss a revised draft of UCP’s confidential disclosure schedules, in each case reflecting the parties’ discussions from earlier that day. Paul, Weiss also sent a revised draft of the merger agreement to Cooley and Greenberg Traurig.

On the afternoon of April 6, 2017, Party E submitted a preliminary proposal for a business combination transaction with UCP. Party E’s preliminary proposal contemplated an all-stock transaction in the range of approximately $9.50 to $9.75 per share of UCP Class A Common Stock. Based on the closing price of Century Communities’ Common Stock on April 5, 2017, the last full trading day before Party E submitted its preliminary proposal, the cash and stock consideration contemplated by Century Communities’ March 17 preliminary proposal represented an implied total value of approximately $11.21 per share of UCP Class A Common Stock.

 

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The transaction committee held a meeting promptly following UCP’s receipt of Party E’s preliminary proposal, which meeting was attended by two additional members of the UCP Board and representatives of UCP’s management, Citi and Paul, Weiss. During this meeting, management provided an update on the status of the parties’ mutual due diligence reviews, noting among other things that during the recent site visits representatives of Century Communities management had indicated that they desired to retain key members of UCP’s management team following the consummation of the proposed merger and that UCP management had reminded the Century Communities representatives that they were not authorized to discuss personal, post-closing employment matters. In addition, management presented the transaction committee with five-year UCP projections that management proposed providing to Citi for its use and reliance in connection with Citi’s financial analyses and opinion. The members of management noted that, while UCP traditionally prepares only three-year projections, five-year projections were prepared for purposes of enabling Citi to perform a discounted cash flow analysis of UCP, that the proposed five-year projections were based on UCP’s board-approved three-year business plan, and that management had extrapolated two additional years of projections under a base case scenario and a constrained capital scenario along with the assumptions underlying the two scenarios. After discussion, the transaction committee approved management’s proposed five-year projections for Citi’s use and reliance in connection with its financial analyses and opinion. Also during this meeting, Citi reviewed with the transaction committee certain preliminary financial aspects of Century Communities’ and Party E’s respective proposals and updated the transaction committee as to the solicitation of additional potential counterparties to date, and the representatives of Paul, Weiss reviewed the terms of the latest drafts of the various transaction documents between Century Communities and UCP as well as the UCP directors’ fiduciary duties in connection with the proposed transaction. Additionally, the transaction committee discussed with UCP’s management and advisors the status of efforts to refinance the 2017 Notes, including options for obtaining bridge or backstop financing ensuring UCP’s ability to refinance the 2017 Notes at their maturity in October 2017 on commercially acceptable terms if a business combination transaction had not closed before that time.

Later in the day on April 6, Greenberg Traurig sent Paul, Weiss revised drafts of the merger agreement and Century Communities’ confidential disclosure schedules.

Messrs. Bogue and Francescon also spoke by phone on the evening of April 6. During their conversation, Mr. Francescon stated that he expected the parties to be in a position to sign a definitive merger agreement by the evening of the following Monday, April 10, 2017, and to be able to announce the transaction before the trading market opened on April 11, 2017. He also informed Mr. Bogue that Century Communities had concluded that, as a result of anticipated changes to the proposed legislation, the potential negative effects of any future enactment of pending Assembly Bill No. 199 were unlikely to undermine Century Communities’ rationale for a business combination transaction with UCP and that the possible future enactment of Assembly Bill No. 199 would not be a gating item to signing a definitive merger agreement.

On the morning of April 7, 2017, Party F submitted a preliminary proposal for a business combination transaction with UCP. Party F’s preliminary proposal contemplated an all-cash transaction in the range of $14.29 to $16.67 per share of UCP Class A Common Stock, however it also stated among other things that Party F had not yet retained legal or financial advisors and that Party F required two to three months to complete due diligence.

Later in the day on April 7, the transaction committee held a meeting, which was attended by one additional UCP director and representatives of UCP’s management, Citi and Paul, Weiss. During the meeting, Mr. Bogue updated the transaction committee on the status of discussions with Century Communities, including that Century Communities’ representatives were beginning to express a loss of patience with the pace of the transaction process and, in Mr. Bogue’s view, did not appear amenable to continuing negotiations past Monday, April 10. Citi then reviewed with the transaction committee the financial terms of Party F’s preliminary proposal. The representatives of Citi also informed the transaction committee that Party F had executed its confidentiality agreement with UCP only a few days prior on April 4, that Party F appeared to have conducted minimal due diligence of non-public UCP documents provided to Party F through UCP’s virtual data room and that they

 

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believed that Party F may have had limited experience with mergers and acquisitions transactions in the United States. The transaction committee, together with UCP’s management and outside financial and legal advisors, then discussed a number of alternative paths to pursue in respect of Party F’s proposal and the various costs and benefits of those alternatives, including in particular the prolonged timeframe Party F had requested to complete its due diligence, the risk of losing the opportunity to enter into a definitive agreement with Century Communities if UCP continued to pursue negotiations with Party F, and the circumstances in which UCP would be permitted to engage in discussions with Party F after entering into a definitive agreement with Century Communities, as well as the potential effect that entering into and publicly announcing a definitive agreement with Century Communities could have on Party F’s willingness to make a post-signing, superior proposal in a price range as high as its preliminary proposal. After discussion, the transaction committee directed Citi to inform J.P. Morgan that UCP had received a higher but conditional proposal from another party and request that Century Communities increase its proposed price and significantly reduce the amount of the termination fee payable if UCP terminated the merger agreement to accept a superior proposal from any party contacted before signing a definitive merger agreement with Century Communities. Additionally, in light of the conditional nature of Party F’s proposal and the risks in pursuing further negotiations with Party F at that time, the transaction committee also directed Citi to speak with representatives of Party F regarding the expected provisions of a definitive merger agreement with respect to the ability of third parties to make unsolicited proposals following execution of such agreement. Representatives of Citi subsequently spoke with representatives of each of J.P. Morgan and Party F as directed by the transaction committee. Since these discussions with Party F, which occurred prior to the execution and delivery of the Merger Agreement on April 10, 2017, UCP and its representatives have neither received nor had any further communication with Party F with respect to a potential transaction involving UCP.

Later in the day on April 7, Party C informed representatives of Citi that it was withdrawing from the process and would not submit a preliminary proposal.

Representatives of Paul, Weiss and Greenberg Traurig also spoke several times on April 7 to resolve the open issues in the parties’ respective confidential disclosure schedules regarding the UCP employee retention plan and Century Communities’ ability to incur indebtedness between signing and closing. Following these discussions, on April 7 and April 8, 2017, Paul, Weiss and Greenberg Traurig sent one another revised drafts of the merger agreement, UCP confidential disclosure schedules and Century Communities confidential disclosures reflecting the resolution of these issues. Greenberg Traurig also sent several revisions to the draft voting agreement to Cooley and Paul, Weiss resolving the open issue regarding PICO’s and Century Communities’ post-closing covenants with respect to certain tax matters and agreeing to PICO’s reduced (28%) voting obligation if the UCP Board changed its recommendation of the merger agreement due to the occurrence of an intervening event that did not permit UCP to terminate the merger agreement.

Also later in the day on April 7, 2017, Mr. Francescon called Mr. Bogue to discuss the status of negotiations and due diligence reviews of Century Communities and UCP. During this phone call, Mr. Francescon requested that UCP not enter into any bridge or backstop financing facility with respect to the 2017 Notes before closing or the earlier termination of a definitive merger agreement in order to avoid incurring the significant costs that such a facility would impose on UCP and given the limited bases on which Century Communities would not be required to close the proposed merger after entering into a definitive agreement. In addition, he informed Mr. Bogue that Century Communities would insist, as a condition to signing a definitive merger agreement that certain members of the UCP management team whom Century Communities desired to retain post-closing agree to amendments of their existing employment agreements with UCP. The purposes of the requested amendments were to align the employees’ compensation and incentives with Century Communities’ business practices and to reduce the amount of severance and/or accelerated vesting of equity awards potentially payable to the executives immediately following the closing of the transaction. Messrs. Francescon and Bogue spoke several more times throughout the day as well as on April 8 and 9 in respect of these issues.

On the morning of April 8, 2017, J.P. Morgan informed Citi that, despite the receipt by UCP of a preliminary proposal from another party, Century Communities would not agree to increase the proposed merger

 

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consideration or agree to a significantly reduced, party-specific termination fee; however, Century Communities indicated that it would agree to reduce the termination fee overall to 3.375% of the total equity value of the proposed transaction.

Beginning on April 8 and continuing through the afternoon of April 10, representatives of Paul, Weiss had a number of discussions with Century Communities’ outside employment and benefits counsel, Fox Rothschild LLP (which we refer to in this proxy statement/prospectus as Fox Rothschild), regarding the amendments to the UCP employment agreements proposed by Century Communities. Paul, Weiss and Fox Rothschild also sent each other a number of drafts of the amendments during this period.

Also on April 8, Greenberg Traurig sent Cooley and Paul, Weiss a first draft of a joint press release announcing the proposed transaction, assuming the parties would be able to reach a definitive agreement. The parties continued to circulate revised drafts of the joint press release up until the evening of April 10. Paul, Weiss also sent Greenberg Traurig and Cooley revisions to the draft merger agreement, none of which reflected material changes to the terms of the proposed transaction.

Throughout the day on April 9, 2017, and into the morning of April 10, 2017, Mr. Bogue, the other members of the transaction committee and representatives of Paul, Weiss had several discussions regarding Century Communities’ request that UCP not agree to any bridge or backstop financing in respect of the 2017 Notes, as a result of which the transaction committee members determined, with input from UCP’s management and Paul, Weiss, that UCP could bear this risk so long as (1) UCP retained flexibility to negotiate, enter into and incur certain fees under (but not draw on) replacement credit facilities between signing and closing, (2) if closing had not occurred by a date sufficiently in advance of the maturity of the 2017 Notes to afford UCP time to arrange alternative financing, UCP could terminate the merger agreement to refinance the 2017 Notes free from the restrictions on incurring new indebtedness under the merger agreement and (3) the deadline under the merger agreement for filing the Form S-4 registration statement of which this proxy statement/prospectus forms a part were accelerated to permit the timely closing of the proposed merger before the accelerated outside date prior to the maturity of the 2017 Notes just mentioned. Informed by these determinations, Mr. Bogue and the representatives of Paul, Weiss communicated with Mr. Francescon and the representatives of Greenberg Traurig, respectively, several times throughout the day on April 9 and into the morning of April 10, 2017, resulting in additional exceptions to UCP’s ability to incur indebtedness under the merger agreement being included in UCP’s confidential disclosure schedules and revisions to the draft merger agreement so that the outside date would be October 15, 2017 and the deadline to file the Form S-4 registration statement of which this proxy statement/prospectus forms a part would be 21 days after the date of the merger agreement. Paul, Weiss and Greenberg Traurig also sent each other several revised drafts of UCP’s confidential disclosure schedules and the merger agreement reflecting the ongoing discussions and ultimate resolution of these issues throughout the day on April 9 and into the morning of April 10, 2017.

In the early afternoon of April 10, 2017, Greenberg Traurig, Cooley and Paul, Weiss circulated final versions of the merger agreement, voting agreement, UCP confidential disclosure schedules and Century Communities confidential disclosure schedules, and Fox Rothschild and Paul, Weiss circulated final versions of the employment agreement amendments.

The UCP Board and transaction committee held a joint meeting after market close on April 10, 2017, along with representatives of UCP’s management, Citi and Paul, Weiss. Mr. Bogue first reported on the outcome of the weekend’s negotiations and Century Communities’ agreement to reduce the termination fee to 3.375%, to permit UCP certain flexibility to negotiate and enter into but not draw on backstop credit facilities between signing and closing, to accelerate the outside date and deadline for filing the registration statement, and to the final forms of the employment agreement amendments. The members of management in attendance, including Mr. Bogue, then left the meeting to permit the other UCP directors to discuss the employment agreement amendments in executive session with the representatives of Paul, Weiss. During the executive session, the other UCP directors determined that the amendments to the employment agreements generally resulted in reductions to the benefits

 

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the employees otherwise would have been entitled to receive following the consummation of a business combination transaction and understood the employees were willing to agree to the amendments as an accommodation to UCP and its stockholders to facilitate reaching a definitive agreement with Century Communities. After the executive session, the representatives of Paul, Weiss again discussed with the UCP Board their fiduciary duties in evaluating the proposed transaction and the final terms of the proposed merger agreement, voting agreement and other ancillary transaction documents. Also at this meeting, Citi reviewed with the UCP Board Citi’s financial analysis of the Merger Consideration and rendered an oral opinion, confirmed by delivery of a written opinion dated April 10, 2017, to the UCP Board to the effect that, as of such date and based on and subject to various assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken described in such opinion, the Merger Consideration to be received by holders of UCP Class A Common Stock (other than PICO and its affiliates) pursuant to the Merger Agreement was fair, from a financial point of view, to such holders. After further discussion, including consideration of the factors described in the section entitled “—UCP’s Reasons for the Merger; Recommendation of the UCP Board of Directors” beginning on page 70 of this proxy statement/prospectus, the transaction committee unanimously recommended that the UCP Board approve the proposed merger agreement and, thereafter, the UCP Board unanimously determined that the proposed merger agreement, the merger and the other transactions contemplated by the merger agreement are fair to and in the best interests of UCP and its stockholders and unanimously approved and declared advisable the merger agreement, the merger and the other transactions contemplated by the merger agreement. The UCP Board also directed the officers of UCP to execute and deliver to Century Communities and thereafter cause UCP to perform the Merger Agreement, resolved that the Merger Agreement be submitted to the UCP stockholders for their approval and recommended that the UCP stockholders vote FOR the adoption of the Merger Agreement. The UCP Board also approved each of the employment agreement amendments and authorized the officers of UCP to execute and deliver them on behalf of UCP.

Later on April 10, Mr. Bogue executed and delivered the Merger Agreement and Voting Agreement on behalf of UCP, Mr. Francescon executed and delivered the Merger Agreement and Voting Agreement on behalf of Century Communities and Mr. Webb executed and delivered the Voting Agreement on behalf of PICO.

Prior to the opening of the U.S. financial markets on April 11, 2017, UCP and Century Communities issued a joint press release announcing the execution of the Merger Agreement and the proposed Merger.

UCP’s Reasons for the Merger; Recommendation of the UCP Board of Directors

In evaluating the Merger and other transactions contemplated by the Merger Agreement, the UCP Board consulted with UCP senior management and UCP’s outside legal and financial advisors and, in the course of reaching its determination to approve the Merger Agreement and to recommend that UCP stockholders vote FOR the proposal to adopt the Merger Agreement, the UCP Board considered a wide and complex range of factors, including the following that weighed positively in favor of the its decision, among others and not necessarily in order of relative importance:

Merger Consideration

 

    Compelling Value. The certainty of value and liquidity for UCP’s stockholders represented by the Merger Consideration compared to the long-term and recent historical trading prices of UCP Class A Common Stock and the performance of the homebuilding sector generally, including that, based on the cash consideration of $5.32 per share and the $6.05 implied value of the stock consideration, calculated using the 0.2309 exchange ratio and Century Communities’ closing stock price on April 7, 2017 (the last trading day prior to the date of Merger Agreement) of $26.20 per share, the implied total per share Merger Consideration of $11.37 represented an approximate (i) 22% premium to UCP’s April 7, 2017 closing stock price, (ii) 16% premium to UCP’s 15-day volume-weighted average stock price of $9.79 per share as of April 7, 2017 and (iii) 12% premium to UCP’s 30-day volume-weighted average stock price of $10.13 per share as of April 7, 2017.

 

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    Ability to Share in Future Value of Century Communities. The fact that, as of Century Communities’ closing stock price on April 7, 2017, approximately 53% of the aggregate Merger Consideration consisted of shares of Century Communities Common Stock, which the UCP Board believed are reasonably likely to increase in value based on the UCP Board’s consideration of the results of UCP’s due diligence review of Century Communities and the reputation, business practices and experience of Century Communities and its management. The stock component of the Merger Consideration will allow UCP stockholders to participate in any potential increase in the equity value of the combined company following the closing of the Merger, including as a result of possible revenue growth and realization of synergies expected to result from the Merger.

 

    Fixed Exchange Ratio. The fact that the exchange ratio in respect of the stock portion of the Merger Consideration is fixed and will not fluctuate based upon changes in the market prices of either UCP Class A Common Stock or Century Communities Common Stock between the date of the Merger Agreement and the consummation of the Merger, providing UCP stockholders the opportunity to benefit from any potential increase in the trading price of Century Communities Common Stock pending the completion of the Merger. The fixed exchange ratio provides UCP stockholders with a certainty of pro forma ownership in the combined company.

 

    Potential Tax Benefits of Stock Portion of Merger Consideration. Because the Merger is expected to qualify as a partially tax-deferred transaction, a UCP stockholder will be required to recognize gain only to the extent of the cash portion of the Merger Consideration received by such stockholder.

 

    Significant Portion of Merger Consideration in Cash. The fact that a large portion of the Merger Consideration will be paid in cash, giving UCP stockholders the opportunity to immediately realize certain value for a significant portion of their investment, and the fact that UCP stockholders would be able to reinvest the cash consideration received in the Merger in Century Communities Common Stock if they desired to do so.

 

    Support from PICO. The fact that PICO, UCP’s majority stockholder, agreed to share any control premium that may be attributed to its majority position and accept the same consideration per share in the Merger as will be received by all other UCP stockholders, which the UCP Board believed demonstrated PICO’s view that the Merger Consideration provided the best value reasonably attainable for the outstanding shares of UCP Class A Common Stock.

 

    No Majority Stockholder. The fact that, based on UCP’s and Century Communities’ respective stockholder bases as of the date of the Merger Agreement, it is expected that former UCP stockholders will receive shares in a combined company that does not have a majority stockholder or control group and whose publicly listed shares trade and will continue to trade in a more liquid, changing and changeable market with a larger float than is currently the case with respect to UCP’s shares.

 

    Best Available Offer. The fact that the UCP Board’s negotiations with Century Communities resulted in increased closing certainty and an increase to the Merger Consideration initially proposed by Century Communities, as well as the UCP Board’s ultimate belief, based on Century Communities’ positions during such negotiations, that the final Merger Consideration provided by the Merger Agreement represented the maximum amount Century Communities would be willing to pay and, although Party F submitted a nominally higher preliminary proposal, the best price and overall deal terms that were reasonably attainable by UCP under the circumstances and likely to be consummated in a timely fashion.

Strategic Considerations

 

   

Financial and Business Position. UCP’s historical, current and projected business, operations, financial condition, prospects, strategy, and competitive position in the homebuilding industry generally. Specifically, the UCP Board considered certain financial forecasts prepared by UCP management and management’s assessments regarding the achievability of UCP’s long-term strategic plan as a

 

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standalone company as compared to the opportunity available to UCP stockholders to receive the Merger Consideration.

 

    Standalone Operational Risks. The advantages of entering into the Merger Agreement and consummating the Merger in comparison to the risks associated with remaining independent as a standalone company and pursuing UCP’s strategic plan, including (i) the fact that UCP’s business is cyclical and significantly affected by changes in general and local economic conditions and any slowing or reversal of the present ongoing housing recovery may materially and adversely affect UCP’s business and results of operations, (ii) potential future competition, including from larger and better funded companies that might have competitive advantages from their broader commercial scope and economies of scale, (iii) the risks inherent in the homebuilding sector for UCP, (iv) the challenges and risks associated with growing UCP organically or through strategic acquisitions, (v) UCP’s particular geographic concentrations and current lack of scale, (vi) the impending maturity of UCP’s outstanding 8.5% Senior Notes due 2017, the need to refinance those notes if UCP were to remain independent as a standalone company, and the risks to UCP’s business if those notes could not be refinanced on commercially acceptable terms prior to maturity, (vii) the risk that California might enact Assembly Bill No. 199 and the effects on UCP’s business and operations in California that Assembly Bill No. 199 might have if enacted and (viii) the various additional risk factors pertaining to UCP that are listed in Item 1A of Part I of its most recent Annual Report filed on Form 10-K.

 

    Potential Strategic Alternatives. The facts that the UCP Board determined to pursue a business combination transaction and to engage in discussions on a non-exclusive basis with Century Communities after a thorough review of other potential strategic alternatives reasonably available to UCP, including pursuing its standalone business plan, acquiring other businesses, continuing to undertake its stock repurchase program, selling additional equity in secondary offerings and seeking other potential acquirers and business combination partners, and that the UCP Board determined that the Merger is superior to those other potential strategic alternatives. While UCP’s most recent strategic review process commenced in January 2017, the UCP Board was further informed by its prior strategic reviews in connection with UCP’s 2015 sale process and discussions with Century Communities in 2016 regarding a potential business combination, which did not result in a transaction.

 

    Opportunities Available to Combined Company. The Merger is expected to provide a number of significant strategic opportunities that UCP and Century Communities would not have as standalone companies, including the following:

 

  The combined company is expected to benefit from increased scale and scope and greater geographic diversity, giving it the ability to leverage complementary strategies and business units, assets and properties across a broader platform, to be a stronger competitor in its industry and markets, and to better withstand national and regional financial market and housing sector volatility and other risks in the future;

 

  The combined company is expected to have a better earnings trajectory, and the Merger is expected to be accretive to Century Communities’ earnings per share;

 

  The combined company is expected to have improved access to and cost of financing in the capital markets; and

 

  The combined company will be a financially stronger company than either UCP or Century Communities standing alone before the Merger and is expected to benefit from a more diverse revenue base and increased net after-tax free operating cash flows following the Merger.

Negotiations with Century Communities and Other Potential Acquirers

 

   

Arms-Length Negotiations with Century Communities. The course of arms-length negotiations between UCP and Century Communities, which, as of Century Communities’ closing stock price on April 7,

 

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2017, eventually resulted in an overall increase of $0.62 from the implied $10.75 Merger Consideration per share of UCP Class A Common Stock initially proposed by Century Communities. The UCP Board believed based on these negotiations that the Merger Consideration represented the highest price per share that Century Communities was willing to pay and that the terms of the Merger Agreement were the most favorable terms to UCP to which Century Communities was willing to agree.

 

    Active Competitive Process. The facts that UCP actively sought proposals from numerous other strategic and financial parties that it believed were logical potential acquirers (17 in total, including Century Communities), none of which ultimately submitted a proposal to acquire UCP on terms more advantageous to UCP and its stockholders than those agreed to with Century Communities or, in the case of the proposal received from Party F, that the UCP Board determined was likely to be consummated at the proposed price range or in a timely fashion, and that UCP did not agree to negotiate exclusively with any potential acquirer (including Century Communities) in the period preceding the UCP Board’s approval of the Merger Agreement, and the UCP Board’s belief that, based on negotiations and discussions with these other strategic and financial parties, the Merger Consideration represented the highest price per share reasonably available as of the date of the Merger Agreement any prospective counterparty was likely to pay to acquire UCP. The UCP Board also considered the foregoing facts, all of which relate entirely to the 2017 sale process, in the context of the prior strategic reviews in connection with UCP’s 2015 sale process and discussions with Century Communities in 2016 regarding a potential business combination, which did not result in a transaction.

Likelihood of Completion

 

    Likelihood of Completion. The likelihood that the Merger will be consummated, based on, among other things, the likelihood of receiving UCP stockholder approval necessary to complete the transaction in a timely manner, the limited number of conditions to the Merger, including that there are no governmental approvals or approvals by Century Communities’ stockholders of the Merger that are conditions to the closing of the Merger, and the remedies available to UCP under the Merger Agreement in the event of various breaches of the Merger Agreement by Century Communities or Merger Sub, as well as Century Communities’ perceived ability to finance the Merger within the timeframe contemplated by the Merger Agreement.

 

    PICO Voting Agreement. The fact that PICO agreed in the voting agreement (i) to vote its shares of UCP Common Stock in favor of the adoption of the Merger Agreement, and that such voting obligation is co-terminous with any termination of the Merger Agreement in accordance with its terms, (ii) to vote for the adoption of the Merger Agreement such number of its shares of UCP capital stock equal to 28% of the total outstanding voting power of UCP if the UCP Board changes its recommendation of the Merger Agreement due to the occurrence of an intervening event, (iii) to terminate various preexisting agreements between PICO and UCP and/or UCP, LLC that Century Communities demanded be terminated as conditions to its willingness to consummate the Merger, (iv) to exchange its existing Series A Units in UCP, LLC for shares of UCP Class A Common Stock immediately prior to the effective time of the Merger, which Century Communities also demanded as a condition to its willingness to consummate the Merger, and (v) to certain restrictions on its ability to sell or transfer the shares of Century Common Stock it receives in the Merger to help Century Communities mitigate any potential impact on the market price of Century Communities Common Stock resulting from a sale or transfer by PICO immediately after the closing of the Merger.

Opinion of UCP’s Financial Advisor

 

   

Opinion of Citi. The opinion of Citi, dated April 10, 2017, to the UCP Board as to the fairness, from a financial point of view and as of the date of the opinion, of the Merger Consideration to be received by holders of UCP Class A Common Stock (other than PICO and its affiliates) pursuant to the Merger

 

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Agreement, which opinion was based on and subject to various assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken as more fully described in the section entitled “—Opinion of UCP’s Financial Advisor” beginning on page 77 of this proxy statement/prospectus.

Terms of the Merger Agreement and Certain Other Agreements

 

    The terms and conditions of the Merger Agreement, including:

 

  the UCP Board’s ability under certain circumstances to change its recommendation in favor of the adoption of the Merger Agreement;

 

  UCP’s ability to respond and become fully informed with respect to unsolicited acquisition or business combination proposals from third parties and to provide such third parties with confidential information;

 

  the UCP Board’s right, after complying with the terms of the Merger Agreement (including Century Communities’ matching rights), to terminate the Merger Agreement in order to enter into a definitive agreement with respect to a superior proposal (including potentially an unsolicited superior proposal from Party F, were it to make one) upon payment of a $7,050,000 termination fee to Century Communities, which amount the UCP Board was advised was within the customary range of termination fees payable in similar transactions, was payable under customary and appropriate circumstances and should not preclude any third party with the financial capability and bona fide interest of acquiring or combining with UCP from submitting, publicly announcing, or pursuing a potential superior proposal;

 

  UCP’s ability to seek specific performance to prevent breaches of the Merger Agreement by Century Communities and to enforce specifically the terms of the Merger Agreement; and

 

  that the Merger Agreement contains terms that, taken as a whole, the UCP Board believed (i) provided a significant degree of certainty that the Merger will be completed as quickly as possible, (ii) while restricting UCP from taking certain actions during the pendency of the Merger, would not unduly interfere with UCP’s ability to operate its business in the ordinary course, and (iii) were of a customary nature for mergers involving companies of UCP’s size and operating in UCP’s industry and geographic regions.

 

    The fact that all of the confidentiality and standstill agreements entered into by UCP with third parties in connection with UCP’s market check process conducted prior to the signing and announcement of the Merger Agreement have either expired or expressly permit such third parties to submit an unsolicited proposal to acquire or enter into a business combination with UCP from and after the public announcement of the Merger Agreement.

Stockholder Approval and Availability of Appraisal Rights

 

    Stockholder Vote. The fact that the adoption of the Merger Agreement will be subject to approval by the holders of a majority of the voting power of the outstanding shares of UCP Common Stock and that, although PICO agreed to vote its shares in favor of the adoption of the Merger Agreement, its voting agreement would terminate automatically upon any termination of the Merger Agreement in accordance with its terms or require it to vote 28% of UCP’s outstanding voting power in favor of the adoption of the Merger Agreement upon a change of the UCP Board’s recommendation in favor of the Merger Agreement due to the occurrence of an intervening event which does not permit the UCP Board to terminate the Merger Agreement.

 

    Absence of Fees or Penalty upon Unsuccessful Vote. The fact that, except for the termination fee, there would not be any fee or expense reimbursement payable to Century Communities or penalty as a result of an unsuccessful vote by UCP stockholders to adopt the Merger Agreement.

 

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    Availability of Appraisal Rights. The fact that appraisal rights under Section 262 of the DGCL are available to holders of UCP Common Stock that comply with the required procedures under the DGCL, which allows such holders to seek appraisal of the fair value of their UCP shares as determined by the Delaware Court of Chancery in lieu of accepting the Merger Consideration.

The UCP Board also considered a number of potential risks and uncertainties in its deliberations concerning the Merger and the other transactions contemplated by the Merger Agreement, including, but not limited to, the following (not necessarily in order of relative importance):

 

    the potential effect of the public announcement of the Merger Agreement, including effects on UCP’s revenues, customers, operating results and share price and UCP’s ability to attract and retain key management and personnel;

 

    the risks and costs to UCP if the Merger is not completed, including the potential diversion of management and employee attention, potential employee attrition, the potential effects on business and customer and supplier relationships, diversion of resources from other strategic opportunities, possibility that the trading price of UCP Class A Common Stock could be adversely affected, and possibility that the market’s perception of UCP’s prospects could be adversely affected;

 

    the fact that UCP has incurred and will continue to incur significant transaction costs and expenses in connection with the Merger and other transactions contemplated by the Merger Agreement, regardless of whether they are consummated, and if the Merger and other transactions are not consummated, UCP will be required to pay its own expenses associated with the Merger Agreement;

 

    the fact that, as an inducement for and condition to Century Communities’ willingness to enter into the Merger Agreement, PICO has agreed to vote a majority of UCP’s outstanding voting power in favor of the adoption of the Merger Agreement, subject to the termination of such obligation if the Merger Agreement is terminated in accordance with its terms, and that the PICO voting agreement requires PICO to vote 28% of UCP’s outstanding voting power in favor of the adoption of the Merger Agreement if the UCP Board changes its recommendation solely in respect of an intervening event (and not to accept a superior proposal);

 

    the fact that the Merger Agreement requires UCP to submit the Merger Agreement to a vote of UCP’s stockholders if the UCP Board changes its recommendation of the Merger Agreement solely in the case of an intervening event;

 

    the fact that Party F submitted a preliminary proposal that was for a price per share of UCP Class A Common Stock greater than the aggregate implied value of the Merger Consideration to be paid pursuant to the Merger Agreement;

 

    the fact that, although the Merger Consideration represented a premium of approximately 22% to the closing price of UCP Class A Common Stock on April 7, 2017, the implied value of the Merger Consideration as of April 7, 2017 represented a premium of approximately 3% to the median analyst stock price target for UCP and an approximately 11% discount to the 52-week intraday high price of UCP’s Class A Common Stock;

 

    the risk that the potential benefits of the Merger may not be fully or partially achieved, or may not be achieved within the expected timeframe;

 

    the potential challenges and difficulties relating to integrating the operations of UCP and Century Communities after consummation of the Merger, including the cost to achieve synergies, which will require consolidating certain businesses and functions, integrating organizations, procedures, policies and operations, addressing differences in the business cultures of the two companies and retaining key personnel, and may disrupt each company’s ongoing business operations or adversely affect relationships with customers, suppliers, employees and others;

 

   

the fact that, because only approximately 53% of the Merger Consideration will be in the form of Century Communities Common Stock, UCP stockholders will have a smaller ongoing equity

 

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participation in the combined company (and, as a result, a smaller opportunity to participate in any potential earnings or growth of Century Communities and potential appreciation in the value of Century Communities Common Stock following the Merger) than they have in UCP. The UCP Board considered, however, that UCP stockholders would be able to reinvest the cash received in the Merger in Century Communities Common Stock if they desired to do so;

 

    the fact that following the closing of the Merger, the existing directors of Century Communities will constitute all of the members of the combined company’s board of directors and the Century Communities co-chief executive officers and other senior management will continue in these roles;

 

    the risk that because the exchange ratio is fixed, the value of the stock consideration to UCP stockholders in the Merger could fluctuate between the signing of the Merger Agreement and the closing of the Merger, including after the UCP stockholder meeting;

 

    the fact that, because the Merger is expected to qualify as a partially tax-deferred transaction, a UCP stockholder will be required to recognize gain to the extent of the cash portion of the Merger Consideration received by such stockholder;

 

    certain provisions of the Merger Agreement could have the effect of discouraging third party offers for UCP, including the restriction on UCP’s ability to solicit third party proposals for alternative transactions involving UCP and the termination fee UCP would be required to pay Century Communities to terminate the Merger Agreement in order to accept a superior proposal from a third party;

 

    the circumstances in which Century Communities may terminate the Merger Agreement, including if the UCP Board changes its recommendation in favor of the Merger;

 

    the restrictions on the conduct of UCP’s business prior to the completion of the Merger, which restrictions generally require UCP to operate its businesses in the ordinary course of business consistent with past practice with limited exceptions, which may delay or prevent UCP from undertaking business opportunities that may arise pending completion of the Merger;

 

    the fact that certain executive officers of UCP have, and the possibility that other executive officers and directors of UCP could have, interests in the transactions contemplated by the Merger Agreement that are different from, or in addition to, those of UCP’s stockholders;

 

    the potential for litigation challenging the Merger, and the possibility that an adverse judgment for monetary damages could have a material adverse effect on the operations of the combined company after the Merger or that an adverse judgment granting permanent injunctive relief could indefinitely enjoin completion of the Merger; and

 

    various other risks associated with the combination and the businesses of UCP and Century Communities described under “Risk Factors” beginning on page 34 of this proxy statement/prospectus.

The UCP Board concluded that these potential risks and uncertainties were outweighed by the benefits that the UCP Board expected UCP and its stockholders to achieve as a result of the Merger. The UCP Board realized that there can be no assurance about future results, including results considered or expected as disclosed in the foregoing reasons.

The foregoing discussion of information and material factors considered by the UCP Board is not intended to be exhaustive, but it does describe the principal factors considered by the UCP Board as aforementioned herein. In view of the variety of factors and substantial amount of information considered in connection with its evaluation of the Merger Agreement and the Merger, the UCP Board did not find it practicable to, and did not, seek to quantify or otherwise assign relative weights to the factors summarized above in reaching its conclusions and in making its recommendation to UCP stockholders to affirmatively vote for the adoption of the Merger Agreement. In addition, each individual member of the UCP Board applied his or her own personal business judgment to the process and may have given different weight to different factors. Except as specifically described

 

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above, the UCP Board did not reach any collective view that any individual factor described above either supported or did not support the overall recommendation of the UCP Board. The factors, potential risks and uncertainties contained in this explanation of the UCP Board’s reasons for the Merger and other information presented in this section contain information that is forward-looking in nature and, therefore, should be read in light of the factors discussed in “Cautionary Information Regarding Forward-Looking Statements” beginning on page 32 of this proxy statement/prospectus.

In considering the recommendation of the UCP Board that UCP stockholders vote FOR the adoption of the Merger Agreement and FOR the adjournment proposal, UCP stockholders should be aware and take into account the fact that certain UCP directors and executive officers have interests in the Merger that may be different from, or in addition to, the interests of UCP stockholders generally and that may create potential conflicts of interest. The UCP Board was aware of and carefully considered these interests, among other matters, in evaluating the terms and structure, and overseeing the negotiation, of the Merger, in approving the Merger Agreement and in recommending that UCP stockholders vote FOR the adoption of the Merger Agreement and FOR the adjournment proposal. For more information on the interests of certain UCP directors and executive officers, see “—Interests of Certain UCP Directors and Officers in the Merger” beginning on page 92 of this proxy statement/prospectus.

Opinion of UCP’s Financial Advisor

UCP engaged Citi as its financial advisor in connection with the proposed Merger. In connection with this engagement, UCP requested that Citi evaluate the fairness, from a financial point of view, of the Merger Consideration to be received by holders of UCP Class A Common Stock (other than PICO and its affiliates) pursuant to the Merger Agreement. On April 10, 2017, at a meeting of the UCP Board held to evaluate the Merger, Citi rendered an oral opinion, confirmed by delivery of a written opinion dated April 10, 2017, to the UCP Board to the effect that, as of that date and based on and subject to various assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken described in such opinion, the Merger Consideration to be received by holders of UCP Class A Common Stock (other than PICO and its affiliates) pursuant to the Merger Agreement was fair, from a financial point of view, to such holders.

The full text of Citi’s written opinion, dated April 10, 2017, to the UCP Board, which describes the assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken, is attached as Annex C to this proxy statement/prospectus and is incorporated herein by reference. The description of Citi’s opinion set forth below is qualified in its entirety by reference to the full text of Citi’s opinion. Citi’s opinion was provided for the information of the UCP Board (in its capacity as such) in connection with its evaluation of the Merger Consideration from a financial point of view and did not address any other terms, aspects or implications of the Merger. Citi expressed no view as to, and its opinion did not address, the underlying business decision of UCP to effect or enter into the Merger, the relative merits of the Merger as compared to any alternative business strategies that might exist for UCP or the effect of any other transaction which UCP might engage in or consider. Citi’s opinion is not intended to be and does not constitute a recommendation to any stockholder as to how such stockholder should vote or act on any matters relating to the proposed Merger or otherwise.

In arriving at its opinion, Citi:

 

    reviewed an execution version, provided to Citi on April 10, 2017, of the Merger Agreement;

 

    held discussions with certain senior officers, directors and other representatives and advisors of UCP and certain senior officers and other representatives and advisors of Century Communities concerning the businesses, operations and prospects of UCP and Century Communities;

 

   

reviewed certain publicly available and other business and financial information relating to UCP and Century Communities provided to or discussed with Citi by the managements of UCP and Century

 

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Communities, including certain internal financial forecasts and other information and data relating to UCP reflecting, for fiscal years 2020 and 2021, alternative home delivery and leverage scenarios for UCP and certain internal financial forecasts and other information and data relating to Century Communities, and discussed with the management of UCP the potential strategic implications and financial and operational benefits anticipated by the management of UCP to result from the Merger;

 

    reviewed the financial terms of the Merger as set forth in the Merger Agreement in relation to, among other things, current and historical market prices and trading volumes of UCP Class A Common Stock and Century Communities Common Stock, historical and projected operating data of UCP and Century Communities, and the capitalization and financial condition of UCP and Century Communities;

 

    analyzed certain financial, stock market and other publicly available information relating to the businesses of other companies whose operations Citi considered relevant in evaluating those of UCP and Century Communities and considered, to the extent publicly available, the financial terms of certain other transactions which Citi considered relevant in evaluating the Merger;

 

    evaluated certain potential pro forma financial effects of the Merger on Century Communities utilizing the internal financial forecasts and other information and data relating to UCP, Century Communities and the Merger referred to above; and

 

    conducted such other analyses and examinations and considered such other information and financial, economic and market criteria as Citi deemed appropriate in arriving at its opinion.

In rendering its opinion, Citi assumed and relied, without independent verification, upon the accuracy and completeness of all financial and other information and data publicly available or provided to or otherwise reviewed by or discussed with Citi and upon the assurances of the managements and other representatives of UCP and Century Communities that they were not aware of any relevant information that was omitted or that remained undisclosed to Citi. With respect to the financial forecasts and other information and data relating to UCP that Citi was directed to utilize in its analyses (including, without limitation, as to tax attributes expected by the management of UCP to be utilized by UCP on a standalone basis), Citi was advised by the management of UCP and Citi assumed, with UCP’s consent, that such forecasts and other information and data were reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of UCP as to, and were a reasonable basis upon which to evaluate, the future financial performance of UCP under the alternative scenarios reflected therein and the other matters covered thereby. With respect to the financial forecasts and other information and data relating to Century Communities that Citi was directed to utilize in its analyses, Citi was advised by the management of Century Communities and Citi assumed, with UCP’s consent, that such forecasts and other information and data were reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of Century Communities as to, and were a reasonable basis upon which to evaluate, the future financial performance of Century Communities and the other matters covered thereby. Citi relied, at UCP’s direction, upon the assessments of the managements of UCP and Century Communities as to, among other things, (i) the potential impact on UCP and Century Communities of certain market, competitive, cyclical, seasonal and other trends and developments in and prospects for, and governmental, regulatory and legislative matters relating to or otherwise affecting, the real estate and residential homebuilding industries and related credit and financial markets, including with respect to the housing markets in which UCP and Century Communities operate, (ii) existing and future relationships, agreements and arrangements with, and the ability to attract, retain and/or replace, key employees, suppliers and other commercial relationships of UCP and Century Communities and (iii) the ability to integrate the businesses of UCP and Century Communities. Citi assumed, with UCP’s consent, that there would be no developments with respect to any such matters that would have an adverse effect on UCP, Century Communities or the Merger or that otherwise would be meaningful in any respect to Citi’s analyses or opinion.

Citi did not make and was not provided with an independent evaluation or appraisal of the assets or liabilities (contingent, derivative, off-balance sheet, accrued or otherwise) of UCP, Century Communities or any other entity and Citi did not make any physical inspection of the properties or assets of UCP, Century

 

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Communities or any other entity. Citi also did not make any analysis of, nor did Citi express any opinion or view as to, the adequacy or sufficiency of reserves for warranty or other claims with respect to home sales or any other matters, and Citi assumed, with UCP’s consent, that such reserves were, and on a pro forma basis would be, in the aggregate appropriate to cover such warranty and other claims. Citi assumed, with UCP’s consent, that the Merger would be consummated in accordance with its terms (including, without limitation, with respect to the exchange by PICO of membership interests in a subsidiary of UCP for shares of UCP Class A Common Stock) and in compliance with all applicable laws, documents and other requirements, without waiver, modification or amendment of any material term, condition or agreement, and that, in the course of obtaining the necessary governmental, regulatory or third party approvals, consents, releases, waivers and agreements for the Merger, no delay, limitation, restriction or condition, including any divestiture or other requirements, amendments or modifications, would be imposed or occur that would have an adverse effect on UCP, Century Communities or the Merger or that otherwise would be meaningful in any respect to Citi’s analyses or opinion. Citi also assumed, with UCP’s consent, that the Merger would qualify for the intended tax treatment contemplated by the Merger Agreement. Citi did not express any opinion or view as to the actual value of Century Communities Common Stock when issued in the Merger or the prices at which Century Communities Common Stock (or any other securities of or relating to Century Communities) or UCP Class A Common Stock (or any other securities of or relating to UCP) would trade or otherwise be transferable at any time. Representatives of UCP advised Citi, and Citi also assumed, that the final terms of the Merger Agreement would not vary materially from those set forth in the execution version reviewed by Citi. Citi did not express any opinion or view with respect to tax, accounting, regulatory, legal or similar matters, including tax or other consequences of the Merger, and Citi relied, with UCP’s consent, upon the assessments of representatives of UCP as to such matters.

Citi’s opinion addressed only the fairness, from a financial point of view and as of its date, of the Merger Consideration (to the extent expressly specified in the opinion), without regard to individual circumstances of specific holders of, or any rights, preferences, restrictions or limitations that may be attributable to, shares of UCP Class A Common Stock or other securities of UCP or its affiliates. Citi’s opinion did not address any other terms, aspects or implications of the Merger, including, without limitation, the form of the Merger Consideration, the form or structure of the Merger, any exchange agreement, voting support and transfer restriction agreement, tax receivable agreement or any other agreement, arrangement or understanding to be entered into in connection with or contemplated by the Merger or otherwise. Citi expressed no view as to, and its opinion did not address, the underlying business decision of UCP to effect or enter into the Merger, the relative merits of the Merger as compared to any alternative business strategies that might exist for UCP or the effect of any other transaction which UCP might engage in or consider. Citi also expressed no view as to, and its opinion did not address, the fairness (financial or otherwise) of the amount or nature or any other aspect of any compensation or other payments to any officers, directors or employees of any parties to the Merger or any affiliates of such parties, or any class of such persons, relative to the Merger Consideration or otherwise. Citi’s opinion was necessarily based upon information available, and financial, stock market and other conditions and circumstances existing and disclosed, to Citi as of the date of its opinion. Although subsequent developments may affect Citi’s opinion, Citi has no obligation to update, revise or reaffirm its opinion. As the UCP Board was aware, the credit, financial and stock markets, and the regional housing markets and industries in which UCP and Century Communities operate, have experienced and continue to experience volatility and Citi expressed no opinion or view as to any potential effects of such volatility on UCP or Century Communities (or their respective businesses) or the Merger. In connection with its engagement and at UCP’s direction, Citi held discussions with selected third parties regarding their potential interest in a possible acquisition transaction involving UCP. The issuance of Citi’s opinion was authorized by Citi’s fairness opinion committee.

In preparing its opinion, Citi performed a variety of financial and comparative analyses, including those described below. The summary below is not a complete description of Citi’s opinion or the analyses underlying, and factors considered in connection with, Citi’s opinion. The preparation of a financial opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a financial opinion is not readily susceptible to summary description. Citi arrived at its ultimate opinion based on the results of all

 

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analyses undertaken by it and factors assessed as a whole, and it did not draw, in isolation, conclusions from or with regard to any one factor or method of analysis. Accordingly, Citi believes that such analyses and factors must be considered as a whole and that selecting portions of its analyses and factors or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying such analyses and its opinion.

In its analyses, Citi considered industry performance, general business, economic, market and financial conditions and other matters existing as of the date of its opinion, many of which are beyond the control of UCP and Century Communities. No company, business or transaction reviewed is identical or directly comparable to UCP, Century Communities or their respective businesses or the Merger and an evaluation of these analyses is not entirely mathematical; rather, the analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the public trading, acquisition or other values of the companies, businesses or transactions reviewed.

The estimates contained in Citi’s analyses and the valuation ranges resulting from any particular analysis are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by such analyses. In addition, analyses relating to the value of companies, businesses or securities do not purport to be appraisals or to reflect the prices at which companies, businesses or securities actually may be sold or acquired. Accordingly, the estimates used in, and the results derived from, Citi’s analyses are inherently subject to substantial uncertainty.

Citi was not requested to, and it did not, recommend or determine the specific consideration payable in the Merger. The type and amount of consideration payable in the Merger were determined through negotiations between UCP and Century Communities and the decision to enter into the Merger Agreement and related documents was solely that of the UCP Board. Citi’s opinion was only one of many factors considered by the UCP Board in its evaluation of the Merger and the Merger Consideration and should not be viewed as determinative of the views of the UCP Board or management with respect to the Merger or the consideration payable in the Merger.

Financial Analyses

The following is a summary of the material financial analyses presented to the UCP Board in connection with Citi’s opinion, dated April 10, 2017. The summary set forth below does not purport to be a complete description of the financial analyses performed by, and underlying the opinion of, Citi, nor does the order of the financial analyses described represent the relative importance or weight given to those financial analyses by Citi. Certain financial analyses summarized below include information presented in tabular format. In order to fully understand the financial analyses, the tables must be read together with the text of each summary as the tables alone do not constitute a complete description of the financial analyses. Considering the data in the tables below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the financial analyses, could create a misleading or incomplete view of such financial analyses. Actual results may differ from those indicated by such financial analyses and such differences may be material. For purposes of the financial analyses described below, the term “implied per share Merger Consideration” means $11.37 per share, calculated as (i) the cash consideration of $5.32 per share and (ii) the implied value of the stock consideration of $6.05 per share based on the 0.2309 exchange ratio and the closing price of Century Communities Common Stock on April 7, 2017 (the last trading day prior to the date of the Merger Agreement). Implied per share equity value reference ranges reflected in the summaries of the financial analyses described below were rounded to the nearest $0.10. Financial data utilized for UCP and Century Communities in the financial analyses described below, to the extent based on internal financial forecasts and estimates provided to or discussed with Citi by the managements of UCP and Century Communities, are referred to as the UCP forecasts and the Century Communities forecasts, respectively.

 

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UCP Financial Analyses

Selected Public Companies Analysis. Citi reviewed certain publicly available financial and stock market information of UCP and the following seven selected companies that Citi considered generally relevant as publicly traded companies in the residential homebuilding industry with operations and scale generally similar to those of UCP, collectively referred to as the UCP selected companies:

 

    AV Homes, Inc.

 

    Beazer Homes USA, Inc.

 

    Century Communities, Inc.

 

    LGI Homes, Inc.

 

    M/I Homes, Inc.

 

    The New Home Company Inc.

 

    William Lyon Homes

Citi reviewed, among other information and to the extent publicly available, fully diluted equity values, based on closing stock prices on April 7, 2017, as multiples of latest quarter book value (as of December 31, 2016 and taking into account tax attributes of the UCP selected companies to the extent publicly available, calculated for certain of such companies on a present value basis), and calendar years 2017 and 2018 estimated earnings per share, referred to as EPS. Financial data of the UCP selected companies were based on Wall Street research analysts’ estimates and other publicly available information. Financial data of UCP was based on the UCP forecasts, Wall Street research analysts’ estimates and other publicly available information. UCP’s multiples were included in the calculation of median multiples summarized below.

The overall low to high latest quarter book value, calendar year 2017 estimated EPS and calendar year 2018 estimated EPS multiples observed for the UCP selected companies for which information was publicly available were 0.8x to 1.8x (with a median of 0.9x), 8.0x to 19.3x (with a median of 10.0x) and 6.9x to 16.6x (with a median of 8.3x), respectively. Citi noted that the latest quarter book value multiple observed for UCP was 0.8x (based on publicly available information) and that the calendar year 2017 estimated EPS and calendar year 2018 estimated EPS multiples observed for UCP were 18.7x and 12.6x, respectively (based on Wall Street research analysts’ estimates), and that UCP’s return on invested capital was generally lower than the returns on invested capital of the UCP selected companies. Citi applied selected ranges of latest quarter book value, calendar year 2017 estimated EPS and calendar year 2018 estimated EPS multiples of 0.9x to 1.2x, 10.0x to 11.4x and 8.3x to 10.3x, respectively, derived from the UCP selected companies to corresponding data of UCP based on publicly available information and the UCP forecasts. This analysis indicated the following approximate implied per share equity value reference ranges for UCP, as compared to the implied per share Merger Consideration:

 

Approximate Implied Per Share Equity

Value Reference Ranges Based on:

  

Implied Per Share Merger Consideration

Latest Quarter

Book Value

  

CY 2017E EPS

  

CY 2018E EPS

    

$11.40 – $14.00

   $5.20 – $5.90    $7.00 – $8.70    $11.37

 

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Selected Precedent Transactions Analysis. Using publicly available information, Citi reviewed financial data relating to the following nine selected transactions that Citi considered generally relevant as transactions involving target companies in the residential homebuilding industry, collectively referred to as the selected transactions:

 

Announcement Date

  

Acquiror

  

Target

September 2016    Lennar Corporation    WCI Communities, Inc.
June 2014    William Lyon Homes    Polygon Northwest Company L.L.C. (residential homebuilding business)
April 2002    Newmark Homes Corp.    Engle Holdings Corp.
February 2002    Beazer Homes USA, Inc.    Crossmann Communities, Inc.
December 2001    Hovnanian Enterprises, Inc.    The Forecast Group, L.P.
October 2000    Technical Olympic USA, Inc.    Engle Holdings Corp.
September 2000    Western Pacific Housing    Schuler Homes, Inc.
February 2000    Lennar Corporation    U.S. Home Corporation
October 1999    Technical Olympic USA, Inc.    Newmark Homes Corp.

Citi reviewed, among other information, transaction values of the selected transactions, calculated as the purchase prices paid for the fully diluted equity values of the target companies, based on closing stock prices as of the announcement dates of the relevant transactions, as multiples of such target companies’ latest quarter book values as of such announcement dates. Financial data of the selected transactions were based on public filings and other publicly available information. Financial data of UCP was based on public filings.

The overall low to high latest quarter book value multiples observed for the selected transactions were 0.7x to 2.0x (with a median of 1.1x). Citi noted that UCP’s return on invested capital was generally lower than the returns on invested capital of other companies in the residential homebuilding industry. Citi applied a selected range of latest quarter book value multiples of 1.0x to 1.2x derived from the selected transactions to UCP’s latest quarter book value (as of December 31, 2016). This analysis indicated the following approximate implied per share equity value reference range for UCP, as compared to the implied per share Merger Consideration:

 

Approximate Implied Per Share

Equity Value Reference Range

  

Implied Per Share Merger Consideration

$12.00 – $14.40

   $11.37

Discounted Cash Flow Analysis. Citi performed a discounted cash flow analysis of UCP by calculating the estimated present value (as of March 31, 2017) of the unlevered, after-tax free cash flows that UCP was forecasted to generate during the last nine months of the fiscal year ending December 31, 2017 through the full fiscal year ending December 31, 2021 based on the UCP forecasts (including the alternative home delivery and leverage scenarios for UCP for fiscal years 2020 and 2021 reflected therein, referred to as the base case and constrained capital case), both before and after taking into account the estimated present value (as of March 31, 2017) of deferred tax assets of UCP expected by the management of UCP to be utilized by UCP during such period, collectively referred to as tax attributes. For purposes of this analysis, stock-based compensation was treated as a cash expense. Citi calculated the implied terminal value of UCP by applying to UCP’s fiscal year ending December 31, 2021 estimated real estate inventory less capitalized interest at the end of the projection period, referred to as adjusted real estate inventory, a selected range of adjusted real estate inventory multiples of 0.95x to 1.05x based on Citi’s professional judgment and taking into account, among other things and to the extent publicly available, observed implied adjusted real estate inventory multiples of the UCP selected companies. The present values (as of March 31, 2017) of UCP’s cash flows, terminal values and tax attributes were then calculated using a selected range of discount rates of 10.1% to 11.5% derived from a weighted average cost of capital calculation. This analysis indicated the following approximate implied per share equity value

 

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reference ranges for UCP, both before and after taking into account the estimated present value (as of March 31, 2017) of UCP’s tax attributes, as compared to the implied per share Merger Consideration:

 

Approximate Implied Per Share Equity
Value Reference Ranges Based on:

  

Implied Per Share Merger

Consideration

Base Case

  

Constrained Capital Case

    

Before Tax
Attributes

  

After Tax
Attributes

  

Before Tax
Attributes

  

After Tax
Attributes

    

$9.20 – $12.70

   $9.40 – $12.90    $9.00 – $12.20    $9.30 – $12.50    $11.37

Century Communities Financial Analyses

Selected Public Companies Analysis. Citi reviewed certain publicly available financial and stock market information of Century Communities and the following seven selected companies that Citi considered generally relevant as publicly traded companies in the residential homebuilding industry with operations and scale generally similar to those of Century Communities, collectively referred to as the Century Communities selected companies:

 

    AV Homes, Inc.

 

    Beazer Homes USA, Inc.

 

    LGI Homes, Inc.

 

    M/I Homes, Inc.

 

    The New Home Company Inc.

 

    UCP, Inc.

 

    William Lyon Homes

Citi reviewed, among other information and to the extent publicly available, fully diluted equity values, based on closing stock prices on April 7, 2017, as multiples of latest quarter book value (as of December 31, 2016 and taking into account tax attributes of the Century Communities selected companies to the extent publicly available, calculated for certain of such companies on a present value basis), and calendar years 2017 and 2018 estimated EPS. Financial data of the Century Communities selected companies were based on Wall Street research analysts’ estimates and other publicly available information. Financial data of Century Communities was based on the Century Communities forecasts, Wall Street research analysts’ estimates and other publicly available information. Century Communities’ multiples were included in the calculation of median multiples summarized below.

The overall low to high latest quarter book value, calendar year 2017 estimated EPS and calendar year 2018 estimated EPS multiples observed for the Century Communities selected companies for which information was publicly available were 0.8x to 1.8x (with a median of 0.9x), 8.0x to 19.3x (with a median of 10.0x) and 6.9x to 16.6x (with a median of 8.3x), respectively. Citi noted that the latest quarter book value multiple observed for Century Communities was 1.3x (based on publicly available information) and that the calendar year 2017 estimated EPS and calendar year 2018 estimated EPS multiples observed for Century Communities were 9.7x and 8.2x, respectively (based on Wall Street research analysts’ estimates). Citi then applied selected ranges of latest quarter book value, calendar year 2017 estimated EPS and calendar year 2018 estimated EPS multiples of 0.9x to 1.2x, 10.0x to 11.4x and 8.3x to 10.3x, respectively, derived from the Century Communities selected companies to corresponding data of Century Communities based on publicly available information and the Century Communities forecasts. This analysis indicated the following approximate implied per share equity

 

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value reference ranges for Century Communities, as compared to the per share closing price of Century Communities Common Stock on April 7, 2017:

 

Approximate Implied Per Share Equity

Value Reference Ranges Based on:

  

Century Communities Per Share Closing

Stock Price on April 7, 2017

Latest Quarter
Book Value

  

CY 2017E EPS

  

CY 2018E EPS

    

$19.70 – $24.30

   $23.10 – $26.30    $20.20 – $25.00    $26.20

Discounted Cash Flow Analysis. Citi performed a discounted cash flow analysis of Century Communities by calculating the estimated present value (as of March 31, 2017) of the unlevered, after-tax free cash flows that Century Communities was forecasted to generate during the last nine months of the fiscal year ending December 31, 2017 through the full fiscal year ending December 31, 2021 based on the Century Communities forecasts. For purposes of this analysis, stock-based compensation was treated as a cash expense. Citi calculated the implied terminal value of Century Communities by applying to Century Communities’ fiscal year ending December 31, 2021 estimated adjusted real estate inventory a selected range of adjusted real estate inventory multiples of 1.00x to 1.20x based on Citi’s professional judgment and taking into account, among other things and to the extent publicly available, observed implied adjusted real estate inventory multiples of the Century Communities selected companies. The present values (as of March 31, 2017) of Century Communities’ cash flows and terminal values were then calculated using a selected range of discount rates of 7.0% to 8.0% derived from a weighted average cost of capital calculation. This analysis indicated the following approximate implied per share equity value reference range for Century Communities, as compared to the per share closing price of Century Communities Common Stock on April 7, 2017:

 

Approximate Implied Per Share

Equity Value Reference Range

  

Century Communities Per Share Closing

Stock Price on April 7, 2017

$20.10 – $28.50

   $26.20

Certain Additional Information

Citi observed certain additional information that was not considered part of its financial analyses for its opinion but was noted for informational purposes, including the following:

 

    historical trading prices of UCP Class A Common Stock and Century Communities Common Stock during the 52-week period ended April 7, 2017, which indicated low to high intraday prices for UCP Class A Common Stock and Century Communities Common Stock during such period of approximately $5.95 to $12.75 per share and approximately $16.30 to $26.25 per share, respectively;

 

    one-year forward stock price targets for UCP Class A Common Stock and Century Communities Common Stock as reflected in selected publicly available Wall Street research analysts’ reports as of April 7, 2017, which indicated (i) in the case of UCP, an overall low to high target stock price range of $10.00 to $14.00 per share on an undiscounted basis and approximately $8.90 to $12.40 per share (with a median of $9.70 per share) on a discounted basis (discounted to present value as of March 31, 2017 using UCP’s cost of equity) and (ii) in the case of Century Communities, an overall low to high target stock price range of $25.00 to $30.00 per share on an undiscounted basis and approximately $23.10 to $27.50 per share (with a median of $24.90 per share) on a discounted basis (discounted to present value as of March 31, 2017 using Century Communities’ cost of equity);

 

    utilizing publicly available information, the overall observed low to high implied premiums payable in 23 selected cash and stock transactions involving target companies in various industries announced from January 1, 2010 to April 7, 2017 with transaction values of $250 million to $750 million based on closing stock prices of such target companies one week prior to transaction announcement, which indicated (i) average one-week premiums ranging from approximately 20.6% to 32.2% and (ii) after applying a selected range of implied one-week premiums of 20% to 30% derived from these transactions to the closing price of UCP Class A Common Stock of $9.35 per share on April 7, 2017, an approximate implied equity value reference range for UCP of $11.20 to $12.20 per share; and

 

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    the illustrative pro forma financial impact of the Merger on, among other things, Century Communities’ estimated EPS and estimated book value for the calendar years ending December 31, 2017 and December 31, 2018 based on the UCP forecasts, the Century Communities forecasts and public filings, assuming the Merger were consummated on December 31, 2016 and taking into account potential strategic implications and financial and operational benefits anticipated by the management of UCP to result from the Merger, which indicated that the Merger could be accretive to Century Communities’ estimated EPS and estimated book value in each of such calendar years. Actual results achieved by the combined company may vary from forecasted results and variations may be material.

Miscellaneous

UCP has agreed to pay Citi for its services in connection with the proposed Merger an aggregate fee currently estimated to be approximately $5.5 million, of which a portion was payable upon delivery of Citi’s opinion and approximately $5 million is payable contingent upon consummation of the Merger. In addition, UCP has agreed to reimburse Citi for Citi’s expenses, including fees and expenses of counsel, and to indemnify Citi and related parties against certain liabilities, including liabilities under federal securities laws, arising out of Citi’s engagement. As the UCP Board was aware, Citi and its affiliates in the past have provided and currently and in the future may provide investment banking, commercial banking and/or other similar financial services to UCP and its affiliates unrelated to the Merger, for which services Citi and its affiliates have received and would expect to receive compensation, including, during the two-year period prior to the date of Citi’s opinion, having assisted UCP in connection with share repurchases under UCP’s stock repurchase program, for which services Citi and its affiliates received during such two-year period aggregate fees of less than $5,000. As the UCP Board also was aware, Citi and its affiliates in the past have provided, currently are providing and in the future may provide investment banking, commercial banking and/or other similar financial services to Century Communities and its affiliates, for which services Citi and its affiliates have received and expect to receive compensation, including, during the two-year period prior to the date of Citi’s opinion, having acted or acting as (i) an initial purchaser for a private placement of senior notes of Century Communities, (ii) a sales agent for an at-the-market offering program of Century Communities and (iii) a lender under a revolving credit facility of Century Communities, for which services described in clauses (i) through (iii) above Citi and its affiliates received during such two-year period aggregate fees of approximately $500,000. Although Citi and its affiliates did not provide investment banking, commercial banking or other similar financial services to PICO during the two-year period prior to the date of Citi’s opinion for which Citi and its affiliates received compensation, Citi and its affiliates in the future may provide such services to PICO and/or its affiliates, for which services Citi and its affiliates would expect to receive compensation. In the ordinary course of business, Citi and its affiliates may actively trade or hold the securities of UCP, Century Communities, PICO and their respective affiliates for their own account or for the account of customers and, accordingly, may at any time hold a long or short position in such securities. Although Citi’s and its affiliates’ security holdings in Century Communities may change from time to time, as the UCP Board was aware, Citi held as of March 31, 2017 approximately 8,687 shares of Century Communities Common Stock, which had an implied aggregate market value as of that date of less than $250,000. In addition, Citi and its affiliates (including Citigroup Inc. and its affiliates) may maintain relationships with UCP, Century Communities, PICO and their respective affiliates.

UCP selected Citi as its financial advisor in connection with the proposed Merger based on Citi’s reputation, experience and familiarity with UCP and its business. Citi is an internationally recognized investment banking firm that regularly engages in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive bids, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes.

Century Communities Unaudited Prospective Financial Information

Although Century Communities may periodically publish limited public guidance concerning its expected financial performance, Century Communities does not, as a matter of course, publicly disclose detailed financial forecasts. However, in connection with the negotiation of the proposed Merger and the other transactions

 

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contemplated by the Merger Agreement, Century Communities management prepared certain non-public unaudited financial forecasts, which were furnished to the Century Communities Board and UCP and to Citi for its use and reliance in connection with its financial analyses and opinion. A summary of the unaudited financial forecasts is included below to provide UCP stockholders access to certain of such non-public unaudited financial forecasts.

The unaudited financial forecasts were not prepared for the purpose of public disclosure, nor were they prepared in compliance with published guidelines of the SEC, the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of financial forecasts, or GAAP. The summary of the unaudited financial forecasts is not being included in this proxy statement/prospectus to influence UCP stockholders with respect to the adoption of the Merger Agreement, including whether or not to seek appraisal rights with respect to shares of UCP Class A Common Stock held by UCP stockholders. The inclusion of the unaudited financial forecasts in this proxy statement/prospectus should not be regarded as an indication that any of Century Communities, UCP or any of their respective affiliates, directors, officers, advisors or other representatives, or any other recipient of the unaudited financial forecasts, considered, or now considers, the forecasts to be material or necessarily predictive of actual future results or events, and the unaudited financial forecasts should not be relied upon as such.

The unaudited financial forecasts include certain non-GAAP financial measures, including unlevered free cash flow (in each case, as defined below). Century Communities management included forecasts of unlevered free cash flow in the unaudited financial forecasts because Century Communities management believes that unlevered free cash flow could be useful in evaluating the future cash flows generated by Century Communities without taking into account debt servicing costs. 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 as presented in this proxy statement/prospectus may not be comparable to similarly titled measures used by Century Communities, UCP or other companies. The footnotes to the tables below provide certain supplemental information with respect to the calculation of these non-GAAP financial measures. The unaudited financial forecasts were not prepared with a view toward compliance with published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information.

All of the unaudited financial forecasts summarized below were prepared by, and are the responsibility of, Century Communities management. No independent registered public accounting firm has examined, compiled or otherwise performed any procedures with respect to the prospective financial information contained in the unaudited financial forecasts and, accordingly, no independent registered public accounting firm has expressed any opinion or given any other form of assurance with respect thereto, and no independent registered public accounting firm assumes any responsibility for the prospective financial information. The reports of the independent registered public accounting firms incorporated by reference into this proxy statement/prospectus relate to Century Communities’ and UCP’s historical financial information. These reports do not extend to the unaudited financial forecasts and should not be read to do so.

The unaudited financial forecasts do not give effect to the Merger and the other transactions contemplated by the Merger Agreement or any changes to Century Communities’ operations or strategy that may be implemented after the completion of the Merger, including any potential synergies realized as a result of the Merger and the other transactions contemplated by the Merger Agreement, 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. Certain potential benefits of the Merger discussed by Century Communities’ and UCP’s respective management teams are described below under “—Possible Benefits of the Merger.”

The unaudited financial forecasts were based on numerous variables and assumptions that are inherently uncertain and may be beyond the control of Century Communities management. In preparing these unaudited financial forecasts, Century Communities management used assumptions that were substantially based on and

 

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consistent with Century Communities’ recent historical results. These assumptions included assumptions with respect to the number of home deliveries anticipated in each fiscal period, average sales prices, gross and contribution margins, general and administrative expenses as a percentage of home sales revenue, and Century Communities’ effective tax rate. The unaudited financial forecasts were prepared by Century Communities management in the first and second quarters of 2017, and Century Communities management believes the unaudited financial forecasts were prepared on a reasonable basis and reflected the best then-currently available estimates and judgments of Century Communities management at that time. Important factors that may affect actual results and cause the unaudited financial forecasts to not be realized include, but are not limited to, the risks, contingencies and other uncertainties described under “Cautionary Information Regarding Forward-Looking Statements” and “Risk Factors” beginning on pages 32 and 34, respectively, of this proxy statement/prospectus. The unaudited financial forecasts are forward-looking in nature. The forecasts relate to expectations of multiple future years’ performance, and such information by its nature becomes less predictive with each succeeding year. As a result, actual results may differ materially, and will differ materially if the Merger and the other transactions contemplated by the Merger Agreement are completed, from the unaudited financial forecasts, and there can be no assurance that the forecasts will be realized. None of Century Communities, UCP, or any of their respective affiliates, directors, officers, advisors or other representatives made or makes any representation to any stockholder or other person regarding Century Communities’ ultimate performance compared to the information contained in the unaudited financial forecasts. Except as may be required under applicable law, Century Communities does not undertake any obligation to update or otherwise revise the unaudited financial forecasts to reflect events or circumstances after the date the forecasts were made, including events or circumstances that may have occurred during the period between that date and the date of this proxy statement/prospectus, or to reflect the occurrence of unanticipated events, even in the event that any or all of the assumptions are not realized.

Century Communities Unaudited Financial Forecasts

The following table summarizes the unaudited financial forecasts related to Century Communities on a stand-alone basis without giving effect to the Merger or the other transactions contemplated by the Merger Agreement, and were prepared by Century Communities management as described above.

 

     For the Years Ending December 31,  
(amounts in millions)    2017E      2018E      2019E      2020E      2021E  

Total Revenue

   $ 1,088      $ 1,143      $ 1,200      $ 1,248      $ 1,285  

Gross Margin

   $ 209      $ 220      $ 224      $ 230      $ 234  

Pre-Tax Income

   $ 81      $ 85      $ 90      $ 97      $ 103  

Unlevered Free Cash Flow (1)

   $ 20      $ 29      $ 28      $ 41      $ 53  

Real Estate Inventory

   $ 906      $ 952      $ 999      $ 1,039      $ 1,070  

 

(1)  Unlevered free cash flow is a non-GAAP financial measure and should not be considered as an alternative to operating income or net income as a measure of operating performance or cash flows or as a measure of liquidity.

Reconciliations of non-GAAP financial measures used in the unaudited financial forecasts to the most directly comparable GAAP measures are provided below:

 

     For the Years Ending December 31,  
(amounts in millions)    2017E      2018E      2019E      2020E      2021E  

Pre Tax Income

   $ 81      $ 85      $ 90      $ 97      $ 103  

Capitalized Interest

   $ 27      $ 29      $ 27      $ 28      $ 26  

Taxes

   $ (38    $ (40    $ (41    $ (44    $ (45

Increase/(Decrease) in Real Estate Inventory

   $ (48    $ (45    $ (48    $ (40    $ (31

(Increase)/Decrease in Net Working Capital (1)

   $ (2    $ 0      $ 0      $ 0      $ 0  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Unlevered Free Cash Flow

   $ 20      $ 29      $ 28      $ 41      $ 53  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)  Excluding real estate inventory.

 

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CENTURY COMMUNITIES DOES NOT INTEND TO UPDATE OR OTHERWISE REVISE THE UNAUDITED FINANCIAL FORECASTS SET FORTH ABOVE TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE THE FORECASTS WERE MADE, INCLUDING EVENTS OR CIRCUMSTANCES THAT MAY HAVE OCCURRED DURING THE PERIOD BETWEEN THAT DATE AND THE DATE OF THIS PROXY STATEMENT/PROSPECTUS, OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS, EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING THESE UNAUDITED FINANCIAL PROJECTIONS ARE NOT REALIZED.

Possible Benefits of the Merger

In connection with the negotiation of the Merger, Century Communities’ and UCP’s respective managements discussed various potential benefits to Century Communities as a result of the Merger and the other transactions contemplated by the Merger Agreement, including, among other things, potential annual cost savings and synergies from a reduction in expenses.

Century Communities expects that approximately $5.0 million of incremental annualized cost synergies will be realized within one year of completion of the Merger. Both Century Communities and UCP were aware that the amounts of any benefits to Century Communities as a result of the Merger were estimates, that they may change, and that achieving any of the benefits would be subject to a number of risks, contingencies and other uncertainties, including those described under “Cautionary Information Regarding Forward Looking Statements” and “Risk Factors” beginning on pages 32 and 34, respectively, of this proxy statement/prospectus.

UCP Unaudited Prospective Financial Information

Although UCP may periodically publish limited public guidance concerning its expected financial performance, UCP does not, as a matter of course, publicly disclose detailed financial forecasts. However, in connection with the negotiation of the proposed Merger and the other transactions contemplated by the Merger Agreement, UCP management prepared certain non-public unaudited financial forecasts regarding UCP’s projected future operations for the 2017 through 2021 fiscal years, including, for fiscal years 2020 and 2021, alternative home delivery and leverage scenarios for UCP, which were furnished to the UCP Board and Century Communities and to Citi for its use and reliance in connection with its financial analyses and opinion. We refer to these unaudited financial forecasts as the “UCP Projections.” A summary of the UCP Projections is included below to provide UCP stockholders access to certain of such non-public unaudited financial forecasts.

The UCP Projections include certain non-GAAP financial measures, including EBITDA and unlevered free cash flow (in each case, as defined below). UCP’s management included forecasts of EBITDA in the UCP Projections because EBITDA is commonly used by investors to assess financial performance and operating results of ongoing business operations and UCP’s management believes that EBITDA could be useful in evaluating the business, potential operating performance and cash flow of UCP. UCP’s management included forecasts of unlevered free cash flow in the UCP Projections because UCP’s management believes that unlevered free cash flow could be useful in evaluating the future cash flows generated by UCP without taking into account debt servicing costs. 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 as presented in this proxy statement/prospectus may not be comparable to similarly titled measures used by UCP, Century Communities or other companies. The footnotes to the tables below provide certain supplemental information with respect to the calculation of these non-GAAP financial measures. The UCP Projections were not prepared with a view toward compliance with published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information.

 

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The UCP Projections were not prepared for the purpose of public disclosure. The summary of the UCP Projections is not being included in this proxy statement/prospectus to influence UCP stockholders with respect to the adoption of the Merger Agreement, including whether or not to seek appraisal rights with respect to shares of UCP Class A Common Stock held by UCP stockholders. The inclusion of the UCP Projections in this proxy statement/prospectus should not be regarded as an indication that any of Century Communities, UCP or any of their respective affiliates, officers, directors, advisors or other representatives or any other recipient of the UCP Projections considered, or now considers, the forecasts to be material or necessarily predictive of actual future results or events, and the UCP Projections should not be relied upon as such.

All of the UCP Projections summarized below were prepared by, and are the responsibility of, UCP management. No independent registered public accounting firm has examined, compiled or otherwise performed any procedures with respect to the prospective financial information contained in the UCP Projections and, accordingly, no independent registered public accounting firm has expressed any opinion or given any other form of assurance with respect thereto, and no independent registered public accounting firm assumes any responsibility for the UCP Projections. The reports of the independent registered public accounting firms incorporated by reference into this proxy statement/prospectus relate to Century Communities’ and UCP’s historical financial information. These reports do not extend to the UCP Projections and should not be read to do so.

While presented with numeric specificity, the UCP Projections were based on numerous variables and assumptions (including, but not limited to, those related to industry performance and competition and general business, economic, market and financial conditions and additional matters specific to UCP’s businesses) that are inherently uncertain and may be beyond the control of UCP management. UCP management prepared the UCP Projections in April 2017 in connection with the negotiation of the proposed Merger, and UCP management believes the UCP Projections were prepared on a reasonable basis and reflect the best then-currently available estimates and judgments of UCP management at that time and, to the best of UCP management’s knowledge and belief at that time, the then-expected course of action and then-expected future financial performance of UCP. For additional information regarding UCP management’s preparation of the UCP Projections see “—Background of the Merger” beginning on page 57 of this proxy statement/prospectus. Important factors that may affect actual results and cause the UCP Projections to not be realized include, but are not limited to, the risks, contingencies and other uncertainties described under “Cautionary Information Regarding Forward-Looking Statements” and “Risk Factors” beginning on pages 32 and 34, respectively, of this proxy statement/prospectus. The UCP Projections are forward-looking in nature. The forecasts relate to expectations of multiple future years’ performance, and such information by its nature becomes less predictive with each succeeding year. The UCP Projections also reflect numerous variables, expectations and assumptions available at the time they were prepared as to certain business decisions that are subject to change. As a result, actual results may differ materially from those contained in the UCP Projections. Accordingly, there can be no assurance that the forecasted results summarized below will be realized. None of UCP, Century Communities or any of their respective affiliates, officers, directors, advisors or other representatives has made or makes any representation to any stockholder or other person regarding UCP’s ultimate performance compared to the information contained in the UCP Projections summarized below, or that the forecasted results will be achieved. UCP has made no representation to Century Communities, in the Merger Agreement or otherwise, concerning the UCP Projections. The UCP Projections summarized below do not give effect to the Merger. UCP urges all stockholders to review UCP’s reported financial results in its most recent SEC filings. Except as may be required under applicable law, UCP does not undertake any obligation to update or otherwise revise the UCP Projections to reflect events or circumstances after the date the UCP Projections were made, including events or circumstances that may have occurred during the period between that date and the date of this proxy statement/prospectus, or to reflect the occurrence of unanticipated events, even in the event that any or all of the assumptions are not realized.

UCP Projections

The following tables summarize the UCP Projections related to UCP on a stand-alone basis without giving effect to the Merger or the other transactions contemplated by the Merger Agreement and were prepared by UCP

 

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management as described above. As noted above and in the section of this proxy statement/prospectus entitled “—Background of the Merger,” the “Base Case” and “Constrained Capital Case” reflect alternative home delivery and leverage scenarios for UCP for fiscal years 2020 and 2021.

Base Case:

 

     For the Years Ending December 31,  
(amounts in millions)    2017E      2018E      2019E      2020E      2021E  

Total Revenue

   $ 404      $ 522      $ 602      $ 725      $ 852  

Gross Margin

   $ 74.8      $ 94.1      $ 109.3      $ 131.2      $ 154.1  

Pre-Tax Income

   $ 15.9      $ 26.0      $ 34.7      $ 41.7      $ 52.7  

EBITDA (1)

   $ 27      $ 42      $ 53      $ 64      $ 78  

Unlevered Free Cash Flow (2)

   $ (54    $ (12    $ (8    $ (45    $ (21

Real Estate Inventory

   $ 458      $ 500      $ 543      $ 633      $ 706  

Adjusted Real Estate Inventory (3)

   $ 438      $ 481      $ 525      $ 618      $ 695  

 

(1)  Earnings before interest, taxes, depreciation and amortization (“EBITDA”) is a non-GAAP financial measure and should not be considered as an alternative to operating income or net income as a measure of operating performance or cash flows or as a measure of liquidity.
(2)  Unlevered free cash flow is a non-GAAP financial measure and should not be considered as an alternative to operating income or net income as a measure of operating performance or cash flows or as a measure of liquidity. For purposes of the UCP Projections, unlevered free cash flow is defined as EBITDA, less depreciation and amortization and income tax expense, plus depreciation and amortization, less capital expenditures, increases/(decreases) in real estate inventory (excluding capitalized interest) and (increases)/decreases in net working capital (excluding real estate inventory).
(3)  For purposes of the UCP Projections, adjusted real estate inventory is defined as real estate inventory less capitalized interest at the end of the projection period.

Constrained Capital Case:

 

     For the Years Ending December 31,  
(amounts in millions)    2017E      2018E      2019E      2020E      2021E  

Total Revenue

   $ 404      $ 522      $ 602      $ 667      $ 747  

Gross Margin

   $ 74.8      $ 94.1      $ 109.3      $ 120.6      $ 134.7  

Pre-Tax Income

   $ 15.9      $ 26.0      $ 34.7      $ 38.3      $ 45.8  

EBITDA

   $ 27      $ 42      $ 53      $ 58      $ 68  

Unlevered Free Cash Flow

   $ (54    $ (12    $ (8    $ (7    $ (9

Real Estate Inventory

   $ 458      $ 500      $ 543      $ 588      $ 641  

Adjusted Real Estate Inventory

   $ 438      $ 481      $ 525      $ 572      $ 628  

 

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Reconciliations of non-GAAP financial measures used in the UCP Projections to the most directly comparable GAAP measures are provided below:

Base Case:

 

     For the Years Ending December 31,  
(amounts in millions)    2017E      2018E      2019E      2020E      2021E  

Operating Income

   $ 26      $ 41      $ 52      $ 62      $ 77  

Depreciation & Amortization

   $ 1      $ 1      $ 1      $ 1      $ 1  
  

 

  

 

  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

EBITDA

   $ 27      $ 42      $ 53      $ 64      $ 78  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Operating Income

   $ 26      $ 41      $ 52      $ 62      $ 77  

Income Tax Expense

   $ (10    $ (16    $ (20    $ (24    $ (30

Depreciation & Amortization

   $ 1      $ 1      $ 1      $ 1      $ 1  

Capital Expenditures

   $ (1    $ (1    $ (1    $ (1    $ (2

Increase/(Decrease) in Real Estate Inventory (1)

   $ (82    $ (43    $ (44    $ (93    $ (77

(Increase)/Decrease in Net Working Capital (2)

   $ 12      $ 5      $ 5      $ 10      $ 8  
  

 

  

 

  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Unlevered Free Cash Flow

   $ (54    $ (12    $ (8    $ (45    $ (21
  

 

  

 

  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)  Excluding capitalized interest.
(2)  Excluding real estate inventory.

Constrained Capital Case:

 

     For the Years Ending December 31,  
(amounts in millions)    2017E      2018E      2019E      2020E      2021E  

Operating Income

   $ 26      $ 41      $ 52      $ 57      $ 67  

Depreciation & Amortization

   $ 1      $ 1      $ 1      $ 1      $ 1  
  

 

  

 

  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

EBITDA

   $ 27      $ 42      $ 53      $ 58      $ 68  
  

 

  

 

  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Operating Income

   $ 26      $ 41      $ 52      $ 57      $ 67  

Income Tax Expense

   $ (10    $ (16    $ (20    $ (22    $ (26

Depreciation & Amortization

   $ 1      $ 1      $ 1      $ 1      $ 1  

Capital Expenditures

   $ (1    $ (1    $ (1    $ (1    $ (1

Increase/(Decrease) in Real Estate Inventory (1)

   $ (82    $ (43    $ (44    $ (47    $ (56

(Increase)/Decrease in Net Working Capital (2)

   $ 12      $ 5      $ 5      $ 5      $ 6  
  

 

  

 

  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Unlevered Free Cash Flow

   $ (54    $ (12    $ (8    $ (7    $ (9
  

 

  

 

  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)  Excluding capitalized interest.
(2)  Excluding real estate inventory.

UCP DOES NOT INTEND TO UPDATE OR OTHERWISE REVISE THE UCP PROJECTIONS SET FORTH ABOVE TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE THEY WERE MADE, INCLUDING EVENTS OR CIRCUMSTANCES THAT MAY HAVE OCCURRED DURING THE PERIOD BETWEEN THAT DATE AND THE DATE OF THIS PROXY STATEMENT/PROSPECTUS, OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS, EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING THESE UNAUDITED FINANCIAL PROJECTIONS ARE NOT REALIZED.

 

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Interests of Certain UCP Directors and Officers in the Merger

In considering the recommendation of the UCP Board that UCP stockholders vote FOR the adoption of the merger agreement and FOR the adjournment proposal, UCP stockholders should be aware and take into account the fact that certain UCP directors and executive officers have interests in the Merger that may be different from, or in addition to, the interests of UCP stockholders generally and that may create potential conflicts of interests. Specifically, (i) Mr. Bogue will be entitled to a one-time transaction bonus equal to $1,972,639, paid 60 days after the closing of the Merger, and may be entitled to up to $1.4 million in accelerated vesting of restricted stock units and $530,000 in cash severance if terminated without “cause” or if he resigns for “good reason” following such closing (plus a COBRA subsidy for 12 months following termination), and (ii) Mr. Pirrello, if terminated without “cause” or if he resigns for “good reason” after such closing, may be entitled to up to $953 thousand in accelerated vesting of restricted stock units and $1,126,726 in cash severance (plus a COBRA subsidy for 12 months following termination). The directors and executive officers of UCP will also be entitled to certain indemnification rights under the Merger Agreement.

The UCP Board was aware of and carefully considered these interests, among other matters, in evaluating the terms and structure, and overseeing the negotiation of, the Merger, in approving the Merger Agreement and in recommending that the UCP stockholders vote FOR the adoption of the merger agreement and FOR the adjournment proposal. All of the independent and disinterested UCP directors approved the Merger Agreement and made the foregoing recommendations.

UCP’s current named executive officers (who also constitute all of its executive officers) are Dustin L. Bogue, President and Chief Executive Officer, and James M. Pirrello, Chief Financial Officer and Treasurer.

UCP Equity Awards

As described in the sections entitled “—Treatment of UCP Equity Awards” and “The Merger Agreement—Treatment of UCP Equity Awards” below, at the effective time of the Merger, each outstanding option to purchase shares of UCP Class A Common Stock, whether vested or unvested, shall, without any further action on the part of the holder, be converted into an option to purchase a number of shares of Century Communities Common Stock equal to the number of shares of UCP Class A Common Stock underlying such option immediately prior to the effective time of the Merger multiplied by the Equity Award Exchange Ratio (as defined below) (rounded down to the nearest whole share), with an exercise price equal to the exercise price applicable to such option immediately prior to the effective time of the Merger divided by the Equity Award Exchange Ratio (rounded up to the nearest whole cent). Each such converted option shall be subject to the same terms and conditions as were applicable immediately prior to the Merger (including vesting terms, conditions, and schedules). As noted below in the section entitled “—CEO Employment Agreement Amendment,” Mr. Bogue has agreed to forfeit all of his outstanding stock options, whether vested or unvested, upon the closing of the Merger. In addition, pursuant to amendments to employment agreements of certain UCP employees that will become effective as of, and are subject to and conditioned upon, the consummation of the Merger, all of the remaining outstanding options to purchase shares of UCP Class A Common Stock, whether vested or unvested, will be canceled for no consideration upon the consummation of the Merger.

In addition, each outstanding restricted stock unit with respect to a share of UCP Class A Common Stock shall, without any further action on the part of the holder, be converted into a restricted stock unit with respect to a number of shares of Century Communities Common Stock equal to the number of shares of UCP Class A Common Stock underlying such award immediately prior to the effective time of the Merger multiplied by the Equity Award Exchange Ratio. Each such converted restricted stock unit shall be subject to the same terms and conditions as were applicable immediately prior to the merger (including vesting terms, conditions, and schedules). However, as noted below in the section entitled “—CEO Employment Agreement Amendment,” Century Communities and Mr. Bogue have agreed to a modified vesting schedule for Mr. Bogue’s outstanding unvested restricted stock units. Pursuant to the terms of Mr. Bogue’s and Mr. Pirrello’s restricted stock unit

 

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award agreements, each of Mr. Bogue and Mr. Pirrello are entitled to full vesting of their unvested restricted stock units upon a termination without “cause” or resignation for “good reason”; based on the average closing sale price of a share of Century Communities Common Stock as reported on the NYSE for the five consecutive trading days ending on and including June 20, 2017, the value of such accelerated vesting (after giving effect to the conversion of such restricted stock units as described above) for Mr. Bogue and Mr. Pirrello would be $1.4 million and $953 thousand, respectively.

The “Equity Award Exchange Ratio” means the sum of (i) 0.2309 (the Stock Exchange Ratio) plus (ii) the quotient obtained by dividing (a) $5.32 (the cash consideration) by (b) the average closing sale price of a share of Century Communities Common Stock as reported on the NYSE for the five consecutive trading days ending on and including the second complete trading day immediately preceding the closing date of the Merger, rounded to the nearest ten-thousandth.

CEO Employment Agreement Amendment

On April 10, 2017, in connection with the transactions contemplated by the Merger Agreement, UCP entered into an employment agreement amendment (which we refer to as the “CEO Employment Agreement Amendment”) with Mr. Bogue. The CEO Employment Agreement Amendment will become effective as of, and is subject to and conditioned upon, the consummation of the Merger.

Under the CEO Employment Agreement Amendment, Mr. Bogue’s current employment agreement will remain in effect, except that:

 

    Mr. Bogue’s new title will be Regional President – West, and he no longer will have a contractual right to report to the board of directors;

 

    Mr. Bogue’s annual cash incentive bonus in respect of the 2017 fiscal year will be determined in accordance with the annual performance goals or objectives established as of immediately prior to the closing of the Merger;

 

    The current vesting schedule for Mr. Bogue’s 124,409 unvested restricted stock units (which currently vest in calendar years 2018 through 2022) will instead vest (after giving effect to their conversion as described above) in three installments as follows: 30,201 of such restricted stock units will vest on the 60th day following the closing of the Merger; 56,544 of such restricted stock units will vest on the first anniversary of the 60th day following the closing of the Merger; and 37,664 of such restricted stock units will vest on the second anniversary of the 60th day following the closing of the Merger. As described above, Mr. Bogue’s restricted stock units will also vest in full upon a termination without “cause” or resignation for “good reason”;

 

    Mr. Bogue will receive a one-time transaction bonus 60 days following the closing of the Merger, equal to three times the sum of his current base salary and average annual bonus for the past three completed fiscal years (such bonus equal to $1,972,639 in total);

 

    As described above, any options to purchase UCP Class A Common Stock, whether vested or unvested, that Mr. Bogue holds at the effective time of the Merger shall be canceled for no consideration; and

 

   

Mr. Bogue’s “change in control” severance arrangements will be eliminated, such that following any termination without “cause” or resignation for “good reason,” Mr. Bogue will be entitled to receive, subject to a release, (i) a severance payment equal to one times his respective base salary, which is currently $530,000 per year (or, in the event of a resignation for “good reason” and if higher, his base salary prior to the event constituting “good reason”), and (ii) a subsidy for any Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (which we refer to as “COBRA”) contribution coverage premiums for 12 months. Under his current employment agreement, upon a termination without “cause” or resignation for “good reason” within two years following a “change in control,” Mr. Bogue would have been entitled to a severance payment equal to three times the sum of his base

 

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salary and average of his annual bonuses for the three previous fiscal years (or, if such termination occurred absent a “change in control,” two times the sum of his base salary and target annual bonus), and Mr. Bogue would have been entitled to a COBRA subsidy for 24 months following termination.

CFO Severance Benefits

Pursuant to his employment agreement with UCP, upon a termination without “cause” or a resignation for “good reason” within two years following a “change in control”, Mr. Pirrello is entitled to a lump sum severance payment, subject to a release, equal to two times the sum of his base salary and average of his annual bonuses for the three previous fiscal years (such severance payment currently equal to $1,126,726 in total), plus a COBRA subsidy for 12 months following termination.

Indemnification and Insurance

Under the Merger Agreement, Century Communities and Merger Sub are required to honor all of UCP’s obligations to exculpate, indemnify (including to advance expenses), defend or hold harmless the current and former UCP directors and officers in accordance with the terms of the UCP Charter, UCP Bylaws and any individual indemnification agreements or other applicable documents from the effective time of the Merger until the expiration of the applicable statute of limitations with to respect to any claims against such persons relating to acts or omissions by such persons before the effective time of the Merger. Century Communities has further agreed to cause UCP’s directors’ and officers’ liability insurance policies to be maintained for a period of six years after the effective time of the Merger, subject to certain terms and conditions in the Merger Agreement. In addition, Century Communities agreed in the Merger Agreement that, at UCP’s option, UCP may purchase before the effective time of the Merger a six-year prepaid “tail” policy, in which case Century Communities is required to cause such coverage to remain in full force and effect for its full term.

Board of Directors and Management Following the Merger

Upon consummation of the Merger, the board of directors and executive officers of Century Communities are expected to remain unchanged. For information on Century Communities’ current directors and executive officers, please see Century Communities’ proxy statement for its 2017 annual meeting of stockholder filed with the SEC on March 29, 2017. See “Where You Can Find More Information” beginning on page 152.

Treatment of UCP Equity Awards

At the effective time of the Merger:

 

    each option, referred to as the UCP option, to purchase shares of UCP Class A Common Stock that is outstanding immediately prior to the effective time of the Merger will automatically, and without any action on the part of the holder thereof, be converted into an option to purchase shares of Century Communities Common Stock, referred to as an “adjusted option,” on the same terms and conditions as were applicable under such UCP option immediately prior to the effective time of the Merger (including vesting terms, conditions and schedules), with the number of shares of Century Communities Common Stock (rounded down to the nearest whole number of shares) subject to such adjusted option equal to the product of (i) the total number of shares of UCP Class A Common Stock underlying such UCP option immediately prior to the effective time of the Merger, multiplied by (ii) the “Equity Award Exchange Ratio” (as defined in the Merger Agreement and described below), and with the exercise price applicable to such adjusted option to equal the quotient (rounded up to the nearest whole cent) obtained by dividing (a) the exercise price per share applicable to such UCP option immediately prior to the effective time of the Merger, by (b) the Equity Award Exchange Ratio; and

 

   

each restricted stock unit with respect to a share of UCP Class A Common Stock, referred to as a UCP restricted stock unit, that is outstanding immediately prior to the effective time of the Merger will

 

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automatically, and without any action on the part of the holder thereof, be converted into a restricted stock unit award with respect to a share of Century Communities Common Stock, with the same terms and conditions as were applicable under such UCP restricted stock unit immediately prior to the effective time of the Merger (including vesting and settlement terms, conditions and schedules), and relating to the number of shares of Century Communities Common Stock equal to the product of (i) the number of shares of UCP Class A Common Stock subject to such UCP restricted stock unit immediately prior to the effective time of the Merger, multiplied by (ii) the Equity Award Exchange Ratio, with any fractional shares rounded to the nearest whole number of shares of Century Communities Common Stock.

The “Equity Award Exchange Ratio” means the sum of (i) 0.2309 (the Stock Exchange Ratio) plus (ii) the quotient obtained by dividing (a) $5.32 (the cash consideration) by (b) the average closing sale price of a share of Century Communities Common Stock as reported on the NYSE for the five consecutive trading days ending on and including the second complete trading day immediately preceding the closing date of the Merger, rounded to the nearest ten-thousandth.

In connection with the transactions contemplated by the Merger Agreement, UCP entered into amendments to employment agreements (which we refer to as the “Employment Agreement Amendments”) with certain employees of UCP. The Employment Agreement Amendments will become effective as of, and are subject to and conditioned upon, the consummation of the Merger. Under the Employment Agreement Amendments, such employees of UCP agreed to forfeit all of their outstanding UCP Options, whether vested or unvested, upon the closing of the Merger. The UCP Options which are subject to the Employment Agreement Amendments represent all of the outstanding UCP Options as of the date of the Merger Agreement.

For more information, see “The Merger Agreement—Treatment of UCP Equity Awardsbeginning on page 113 of this proxy statement/prospectus.

Material U.S. Federal Income Tax Consequences of the Merger

The following is a discussion of the material U.S. federal income tax consequences of the exchange of shares of UCP Class A Common Stock for a combination of shares of Century Communities Common Stock and cash pursuant to the Merger Agreement.

This discussion addresses only “U.S. holders” of UCP Class A Common Stock, meaning persons who hold that stock as a capital asset and are “U.S. persons,” as defined for U.S. federal income tax purposes. For these purposes a “U.S. person” is: