Denver’s Richmond American Homes agrees to buyout from Japanese firm
M.D.C. Holdings, a 51-year-old Denver-based homebuilder with nearly a quarter of a million houses to its credit and a footprint that expands across the U.S., has agreed to a nearly $5 billion buyout offer from a Japanese firm.
The homebuilder, founded by Larry Mizel in 1972 and parent of Richmond American Homes, announced the deal with Japanese homebuilder Sekisui House Ltd. on Thursday.
M.D.C. is one of the country’s largest homebuilders and a major employer in Colorado with thousands of employees. For decades, Mizel has been a major force in Colorado’s business community and a high-profile philanthropist in the state and nationally.
A U.S. subsidiary of Sekisui will pay $63 a share in cash, a 19% premium to M.D.C.’S closing stock price of $43.09 on Wednesday. Shares of the company closed up $9.75 to $62.84.
Sekisui House, based in Osaka, has delivered more than 2.62 million homes worldwide since its start in 1960 and has been active in the U.S. for five decades through its brands Woodside Homes, Holt Homes, Chesmar Homes and Hubble Homes.
Sekisui House said adding M.D.C. will make it the fifth-largest homebuilder in the U.S. and allow it to construct more than 15,000 homes a year, pushing it way ahead of its target to build 10,000 homes a year outside Japan.
Japan’s population has fallen by about 3.7 million people over the past 13 years, according to the World Bank, and the country has an estimated 10 million homes sitting empty.
“This exciting acquisition of M.D.C. represents a significant advancement of the Sekisui House strategy to expand our U.S. presence and bring the value of our technology, innovation and philosophies to U.S. homebuilding and ultimately to our customers,” said CEO Yoshihiro Nakai in a news release.
Adam Agron and others at Brownstein Hyatt Farber Schreck law firm in Denver, along with the Paul Weiss law firm in New York, represented M.D.C in the transaction.
The law firm Morrison Foerster LLP is acting as a legal adviser to Sekisui House.
Executive chairman Mizel started the company in 1972 as Mizel Development Corp., later M.D.C. Holdings, and took the company public in 1984. M.D.C. has built over 240,000 homes in its 51-year history and ranks as a top12 homebuilder in the U.S., with revenues of $5.6 billion in 2022.
Richmond American Homes, its brand, is active in Arizona, California, Colorado, Florida, Idaho, Maryland, Nevada, Oregon, Pennsylvania, Tennessee, Texas, Utah, Virginia and Washington. M.D.C. also has subsidiaries offering mortgages, home insurance, title insurance and escrow services.
As other companies have come and gone over the years, M.D.C. has remained a constant on Colorado’s corporate scene, reflective of the ability of Mizel and longtime CEO David Mandarich to hold tight control and survive both rich and lean years in the construction industry.
“Our ability to navigate through varying housing market cycles while maintaining business resilience speaks to our strategic prowess, and has led not only to the creation of significant shareholder value, but also to an industry-leading dividend yield for our shareholders,” Mizel said in a statement.
Mizel cited Sekisui
Houses’ “well-regarded” technology and processes and reputation for quality in the decision to join forces with it.
Mizel controls 14.8% of M.D.C. shares, putting him in line to receive $725.2 million, while Mandarich’s 7.9% ownership share should result in a payout for him of $387.1 million. Mizel received $18.5 million in compensation in 2022, while Mandarich received $15.7 million, according to a proxy filing made with the U.S. Securities and Exchange Commission last year.
Mizel, 81, and Mandarich, 72, are expected to remain involved with M.D.C operations. The deal is expected to close in the first half of this year, pending regulatory approvals.
Jay Mccanless and Brian Violino, analysts at securities firm Wedbush, said in a research note that the price Sekisui is paying lines up with the average book value they have assigned to domestic homebuilders. They lifted their price target for M.D.C. from $51 a share to $63 a share.
The last time the company’s shares, which trade under the ticker MDC, reached a price this high was in the first half of 2005, when a housing boom drove strong demand. M.D.C. was among the survivors of the crash that followed. And while the stock hasn’t been a big gainer in value over the years, the company has paid a robust dividend to shareholders.
The acquisition of M.D.C. Holdings comes as 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, The Associated Press reported.
Mizel and Mandarich created “one of the soundest and best homebuilders in the county,” said Norman Brownstein, founder and chairman of Brownstein Hyatt Farber Schreck.
“For many, many years. M.D.C. has been the largest homebuilder in Colorado. It has created an immense amount of homes for people and communities. It has employed tens of thousand of people and has had a dramatic impact on the economy of Colorado,” Brownstein said.
The impact of the philanthropic work by the company and its leaders through the years has been profound, Brownstein said. Since 1999, Mizel and Mandarich have donated millions of dollars directly and through the Mdc/richmond American Homes Foundation, including $1.1 million raised alongside employees for victims of the Sept. 11 attacks.
Recipients of the funds have included National Jewish Hospital, Children’s Hospital, St. Joseph’s Hospital, Craig Hospital, the Boys and Girls Clubs of Metro Denver, the Denver Zoo and Volunteers of America.
The Mizel Institute has also funded the Counterterrorism Education Learning Lab (CELL) and the Mizel Museum. Mizel founded Colorado Concern, a probusiness organization that has focused on issues in the state legislature.
Mizel was a founder of and is on the board of trustees of the Simon Wiesenthal Center. He was instrumental in developing and raising money for the Museum of Tolerance-jerusalem, said Doug Friednash, a partner with Brownstein Hyatt Farber and Schreck and was chief of staff for former Gov. John Hickenlooper.