The owners of Woodside Homes have agreed to sell the 40-year old entity, ranked 27 in the Builder 100, to Japan's largest home building enterprise Sekisui House in a deal with an estimated value in excess of $468 million.
The transaction--which transfers ownership of all shares of the company including equity interests of BUILDER parent-company Hanley Wood majority owners Oaktree AC (35.7%), Stonehill Institutional Partners (33.4%) and 12 other "owners" whose stakes total 30.9%--is set to close March 1.
The deal is one in an increasingly rapid-fire series of private home builder acquisitions by Japanese mega-corporations fueled by expansionist interests in the United States market, and more suppressed growth opportunity in Japan itself. Several other deals are said to be in the works as well, with both Japanese--Sumitomo, Daiwa House--and a number of China-based organizations seeking beachheads in the United States home building and residential development business.
The acquisition gives Sekisui's North American Sekisui House an expansive, diversified, and well-hedged residential footprint, capable of both generating profits at its current operational scale, and growing into other markets across masterplanned community development, multifamily apartments, and single-family detached home building. Here's how Sekisui looks at the Woodside opportunity:
The Company has been steadily expanding its business fields and working to achieve further growth by implementing the Deployment of Growth Strategies Focused on the "Residential" Business Domain as set forth in the mid-term management plan, which ended on January 31, 2017. One of the expanding business domains, the Company has taken steps to fully develop is the Overseas Business, which began with its entry into the housing market in Australia in 2009. In the United States, the Company has been engaging in the residential land marketing business in the suburbs of major cities by developing master plan-type communities and selling them to American home builders, and in the business for developing, managing and selling multi-family rental residence mainly in Los Angeles, Seattle and other urban areas on the West coast.
In the housing market in the United States, the view that demand for detached houses in the suburbs will gain speed in the future has a consensus, mainly reflecting falling unemployment rates, rising wages and the mortgage rates that are still at historically low levels. The Company views this market as one of the markets that should be the focus of the Company's efforts in the Overseas Business. In the domestic market, the Company has been working to develop and popularize eco-friendly housing systems as its contribution to the solution of social problems through housing, by supplying its mainstay product, Zero Energy Houses (ZEH), and houses with rising added-value into the future. As in Japan, interest in and support for sustainable living environments is rapidly expanding in the United States, as exemplified by the State of California's new regulation that requires all newly built detached houses to be ZEH by 2020.
The Company considers this market environment in the United States to be a significant business opportunity to take advantage of its environmental techniques and to make serious inroads into the homebuilding business. With this full-scale entry, the Company decided to cooperate with Woodside Homes Company, LLC, which has been developing business under the same platform and unified brand in several regions and has established a stable revenue base over the years. Based on this cooperation, the Company aims to expand business in the State of Utah where Woodside Homes Company, LLC's head office is located, the State of California and other parts of the Western United States
"This is really good news for the Woodside team, its partners, vendors, and customers going forward," said Woodside CEO Joel Shine on a call this morning. Shine noted that executive management and operations at Woodside will remain as is, even as the company's strategy finds a new level thanks to a significant capital access adrenaline boost, and the technological and corporate cultural might of one of the largest, most-advance, "greenest" home building operations in the world.
"They're 10 years ahead of anything I've come across in the United States in home building technology," Shine adds. "And when it comes to 'green,' they look at what we're doing here in building performance and point to how that was happening in Japan years ago, and they've improved it a lot since then. So, this is exciting."
Woodside Homes, established in 1977, has been a regional power house for four decades, except that it plunged into bankruptcy in late 2008, reemerged as a new going concern in 2009, and nearly went public in 2014, with a slew of other privates who now mostly make up home building's public "mini-mes," possibly targets for further mergers and acquisitions deals.
"From where we were in 2009, where we'd worked ourselves back into solvency, to the moment where we were one day from going public in 2014, to now, where we're part of one of the world's biggest and best home building enterprises, it's been quite a journey," Shine told BUILDER this morning.
Here's the text of the press release:
SEKISUI HOUSE, LTD. To Acquire Woodside Homes
Osaka, Japan, [February 22, 2017] -- SEKISUI HOUSE, LTD. and Woodside Homes today announced that it has entered into a definitive merger agreement under which SEKISUI HOUSE will acquire 100% ownership of Woodside Homes. SEKISUI HOUSE, LTD, Japan’s largest homebuilder and leading diversified developer, will complete the transaction through one of its wholly-owned US subsidiaries. Woodside Homes is one of America’s top 30 homebuilders having built more than 40,000 homes across the US, with current operations in Arizona, California, Nevada, and Utah.
The acquisition of Woodside Homes is part of SEKISUI HOUSE’s long-term growth strategy to diversify its business portfolio and create operating synergies within its other operating platforms.
“There is a natural alignment between our companies -- both sharing the same philosophy of creating environmentally sound communities and fulfilling the housing industry’s responsibility to future generations. Woodside Homes is an important growth platform for our North America homebuilding operations,” said Isami Wada, Chairman, Representative Director & CEO, SEKISUI HOUSE.
Joel Shine, Chief Executive Officer of Woodside Homes, remarks “We’re thrilled with the opportunity to join forces with SEKISUI HOUSE. The acquisition provides the opportunity for us to continue to build homes with lasting value, integrity and quality while providing excellent service and earning the trust and respect of customers who seek the most from their homeownership experience.”
Woodside Homes’ company name, executive team and daily operations will remain the same. SEKISUI HOUSE will provide shared technologies and economic resources in support of Woodside Homes’ growth. Both parties will exchange creative ideas and techniques to create value and address the many and varied needs of the individual homeowner and the broader homebuilding market.
Closing is scheduled to occur at the end of February 2017.
Since its founding in 1960, SEKISUI HOUSE has developed housing-related businesses that have come to lead the housing industry by creating environment, economic, social, and homeowner value. NORTH AMERICA SEKISUI HOUSE, LLC (NASH) was established by SEKISUI HOUSE in 2010 as a wholly-owned US subsidiary and its portfolio includes more than 30 active suburban master-planned communities and 20 urban-infill and transit-oriented developments. The acquisition of Woodside Homes firmly establishes SEKISUI HOUSE as a market leader in the US in homebuilding and the development of master- planned communities, mixed-use, multifamily and condominium properties. Representation for this successful transaction was provided by Hearthstone and Morrison & Foerster for SEKISUI HOUSE and Moelis & Company and Milbank, Tweed, Hadley, & McCloy for Woodside Homes and Richards Kibbe & Orbe LLP for the representative of the selling equity holders of Woodside Homes.
About SEKISUI HOUSE, LTD. SEKISUI HOUSE, LTD is the largest homebuilder and one of the leading diversified developers in Japan. SEKISUI HOUSE is managing its US operations through its subsidiaries in the US. The US operations include the development of master-planned communities, mixed-use, multifamily apartment, and condominium properties throughout the US. http://www.sekisuihouse.co.jp/english/index.html ￼￼￼
About Woodside Homes: Based in Salt Lake City, Utah, Woodside Homes is a privately held company and one of America’s top 30 homebuilders. The company has built more than 40,000 homes across the US, with current operations in Arizona, California, Nevada, and Utah -- earning the trust and confidence of families who seek the very most from their homeownership experience. www.woodsidehomes.com