July 23, 2024

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Japanese housebuilders hunt US M&A deals

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Three of Japan’s biggest developers are “aggressively” shopping for housebuilders to buy in the US as they hunt growth outside their shrinking domestic market.

Daiwa House, Sekisui House and Sumitomo Forestry are all actively searching for US acquisitions and have approached multiple potential targets, according to four M&A bankers and lawyers familiar with the matter.

The Japanese groups have market capitalisations ranging from Y770bn to Y2.7tn, or $5.3bn to $20bn, making numerous large US companies potential targets. However, two of the people said that the companies might initially opt for smaller acquisitions.

“More and more we are seeing US housebuilders being aggressively courted by would-be Japanese buyers,” said one banker familiar with the companies involved. Another said they expected at least one deal to be struck before the March when Japan’s financial year ends.

US homebuilders have seen their stocks rise in recent weeks, recouping most of the losses in the previous four months, according to analysts at BCA Research.

US house prices rose for the eighth consecutive month in September, as lean housing inventory continued to boost demand despite high mortgage rates. 

“To the extent that elevated mortgage rates are dampening existing homeowners’ willingness to sell, they are also reducing the supply of existing homes for sale on the market. At the same time, a shortage of housing is providing a floor beneath construction activity. The latter could limit homebuilders’ pain amid a recession next year,” said the BCA analysts in a recent note to clients.

Faced with a declining population and glut of existing housing in their domestic market, the Japanese groups are willing to act despite the fact that the yen is close to one of its weakest points in decades, which would make US acquisitions relatively expensive.

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2023-12-03 20:00:35

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