LOS ANGELES (AP) — Japan's Sekisui House Ltd. is buying Denver-based homebuilder M.D.C. Holdings Inc. for $4.9 billion in a deal that would make the Japanese company the fifth-largest builder of new homes in the U.S.
The companies said Thursday that they reached a definitive agreement for Osaka-based Sekisui to acquire M.D.C. Holdings for $63 per share. The all-cash offer translates to a roughly 19% premium over M.D.C. Holdings' closing stock price Wednesday.
Shares in M.D.C. Holdings jumped more than 18% in afternoon trading Thursday. The stock is up about 75% over the past 12 months.
The transaction is expected to close in the first half of this year, subject to shareholder and regulatory approvals.
M.D.C. Holdings, which was founded in 1972, builds homes under the Richmond American Homes brand in in California, Florida, Texas and 13 other states.
In addition to the U.S. and Japan, Sekisui House has operations in Australia, the U.K., China and Singapore.
With M.D.C. in its portfolio, Sekisui House would become the fifth-largest homebuilder in the U.S., based on number of completed sales in 2022.
The builder has been gradually expanding its footprint in the U.S. new-home market through acquisitions. Among the U.S. home construction brands it now operates are Woodside Homes, Holt Homes, Chesmar Homes and Hubble Homes.
The acquisition will also help Sekisui House reach its goal of building 10,000 homes outside of Japan by fiscal year 2025 sooner than anticipated, the company said.
“Demand for quality homes in the U.S. market remains high and M.D.C. will expand our ability to serve customers in key U.S. states that are poised for continued growth,” Toru Tsuji, CEO of SH Residential Holdings and executive officer of Sekisui House, said in a news release.
The acquisition comes at a time when the U.S. housing market remains mired in a deep sales slump. A sharp run-up in mortgage rates that began in 2022 coupled with years of soaring prices and a stubbornly low level of resale homes on the market has kept many would-be homebuyers and sellers on the sidelines.
But while sales of previously occupied U.S. homes sank more than 19% through the first 11 months of last year, the market for new construction homes has held up better. Sales were up 3.9% year-to-date as of November.
At the expense of healthier profit margins, homebuilders won over many homebuyers by reducing prices and offering incentives, including covering buyers’ closing costs or buying down the interest rate on their home loan.
The trends helped boost homebuilder stock prices last year. One prominent exchange traded fund, the SPDR S&P Homebuilders ETF, is up more than 43% over the past 12 months, or more double the S&P 500.