Sekisui House Ltd. of Japan is paying $4.9 billion to acquire Denver-based M.D.C. Holdings Inc., making the Japanese company the country’s fifth-largest new home builder.
The firms announced on Thursday that they had finalized plans for Sekisui, located in Osaka, to purchase M.D.C. Holdings for $63 per share. The all-cash offer is equivalent to a price increase of around 19% above the closing stock price of M.D.C. Holdings on Wednesday.
M.D.C. Holdings’ stock increased by more than 18% during Thursday afternoon trade. In the last 12 months, the stock has increased by around 75%.
With shareholder and regulatory approvals pending, the transaction is anticipated to be finalized in the first half of this year.
Founded in 1972, M.D.C. Holdings builds homes in Texas, Florida, California, and 13 other states under the Richmond American Homes brand.
Sekisui House operates in Australia, the United Kingdom, China, and Singapore, in addition to the United States and Japan.
Based on the number of completed sales in 2022, Sekisui House would rank fifth among American homebuilders if it included M.D.C. in its portfolio.
Through acquisitions, the builder has been progressively increasing its market share in the US new home market. These days, it manages the
American home-building companies include Woodside Homes, Holt Homes, Chesmar Homes, and Hubble Homes.
Sekisui House said that the acquisition will enable it to complete 10,000 homes outside of Japan by the fiscal year 2025, one year ahead of schedule.
“M.D.C. will expand our ability to serve customers in key U.S. states that are poised for continued growth,” stated Toru Tsuji, CEO of SH Residential Holdings and executive officer of Sekisui House, in a news release. “Demand for quality homes in the U.S. market remains high.”
The purchase is being made as the US housing market is still seeing a severe decline in sales. Many prospective buyers and sellers have remained on the sidelines as a result of the dramatic increase in mortgage rates that started in 2022, years of record high prices, and a persistently low supply of resale properties on the market.
However, the market for newly constructed homes has held up better than that of previously inhabited homes in the United States, where sales dropped more than 19% through the first eleven months of last year. As of November, sales were up 3.9% on an annual basis.
Homebuilders gained the favor of many consumers by lowering prices and providing incentives, such as paying closing fees or lowering the interest rate on the buyer’s mortgage, even at the sacrifice of wider profit margins.
The prior year’s homebuilder stock prices were boosted by these patterns. The SPDR S&P Homebuilders ETF, a well-known exchange-traded fund, has increased by more than 43% in the last 12 months—more than twice the S&P 500.
