Japan’s $4.9 billion purchase of U.S. builder heralds more mergers and acquisitions

M&A deals among Japanese homebuilders are heating up.

Sekisui House Ltd. on Thursday announced a $4.9 billion acquisition of MDC Holdings Inc., a purchase that will help it achieve a key goal of diversifying its ambitions outside Japan. It could be the largest acquisition of a homebuilder by a Japanese company in the United States. said investment banker Margaret Whelan.

Whelan, founder of Whelan Advisory, said Asian buyers have been active in the U.S. residential construction market for a decade, purchasing at least 29 builders or related companies across the country.

But the appetite among Japanese buyers is particularly high as they expand and battle a declining population at home. Whelan said she would announce a separate deal next week for a Japanese company to acquire a regional homebuilder.

“They’re taking it to the next level,” she said. “You don’t change things by buying smaller companies.”

Homebuilders in the U.S. are taking strong interest in new construction as tight inventory leaves buyers scrambling for scrap. But for builders looking to offer mortgage rates to buy and attract customers, scale has always been key. This has even facilitated transactions between American companies.

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Sekisui House CEO Yoshihiro Nakai said at a press conference on Thursday that the company had temporarily completed a large-scale acquisition. Since 2017, the Osaka-based company has acquired U.S. builders including Woodside Homes, Holt Homes and Chesmar Homes. Other large Japanese builders, such as Daiwa House Industry Co. and Sumitomo Forestry Co., have also been active in the market in recent years.

Sekisuiya shares were up 2.9% in Tokyo on Friday morning, with the stock up 40% in the past year. MDC closed up 18% in New York on Thursday.

As part of the Sekisui deal, MDC shareholders will receive $63 per share, about 19% above Wednesday’s closing price. The acquisition, expected to close in the first half of this year, will give Sekisui House a presence in populous states including California, Texas and Florida.

Citigroup analyst Masashi Miki wrote in a note that the deal could help drive Sekisui’s long-term profit potential given the growth of the U.S. single-family home market, adding that the acquisition is larger than It is expected to weaken the builder’s financial position in the United States. short term.

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The latest deals are part of a broader wave of overseas investments by Japanese companies over the past few years, driven by Japan’s accelerating population decline, which has left domestic economic growth prospects limited. The news comes just weeks after Nippon Steel announced the measure. Proposed acquisition of U.S. Steel Corporation. Other large deals in recent years have spanned sectors including food, beverages and pharmaceuticals.

Japanese investors have also been buying property overseas despite a weaker yen.

Japan’s exchange rate has depreciated steadily in recent years, causing the cost of overseas shopping to rise. Data compiled by Bloomberg show that in the three years to the end of 2023, the yen’s exchange rate against the U.S. dollar fell by about 27%, the largest decline among the currencies of major developed countries.

“I think we will continue to see Japanese builders active in the U.S. market as they look to offset slower domestic growth and lower population growth,” said Drew Redding, an analyst at Bloomberg Intelligence.

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