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MDC to be Acquired by Sekisui House for $4.9B, Stock Gains

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M.D.C. Holdings, Inc.’s shares rose 18.4% on Jan 18 on the news that one of the top-tier house manufacturers in Japan — Sekisui House, Ltd. — intends to acquire the company. A wholly-owned subsidiary of Sekisui House has signed a definitive agreement to acquire MDC in an all-cash transaction with an equity value of $4.9 billion.

MDC shareholders will receive $63.00 per share in cash, which represents an approximately 19% premium to MDC's closing stock price on Jan 17 and an approximately 41% premium to MDC's 90-day volume-weighted average trading price, subject to the terms and conditions of the agreement. The acquisition is expected to close in the first half of 2024.

Post buyout, MDC will help accelerate Sekisui House's global vision to "make home the happiest place in the world" and achieve the latter’s target of supplying 10,000 homes outside Japan by fiscal 2025. Sekisui House will be the fifth largest U.S. housebuilder (based on the number of houses closed in 2022).

A Look at MDC’s Growth & Prospects

For more than 50 years, MDC has completed the construction of more than 240,000 homes and has emerged as a top 10 homebuilder in the United States. The company’s ability to navigate through varying housing market cycles while maintaining business resilience, creating significant shareholder value and becoming an industry-leading dividend yield for investors is commendable.

Its strategic decision to combine with Sekisui House is a testament to its focus on maximizing investors' value and delivering significant cash proceeds for shareholders.

Zacks Investment Research
Image Source: Zacks Investment Research

This Zacks Rank #3 (Hold) stock has surged 69.4% in the past three months, outperforming the Zacks Building Products - Home Builders industry’s 44% growth, the Zacks Construction sector’s 26.2% increase and the S&P 500 index’s 11.6% rise.

The company’s earnings for 2024 has moved upward to $5.38 per share from $5.30 over the past 30 days, implying 4% year-over-year growth. Its revenues estimate also indicates 7.1% year-over-year growth. This positive trend signifies bullish analysts’ sentiments, suggesting robust fundamentals and the expectation of outperformance in the near term.

Stocks to Consider

Some better-ranked stocks in the same space are Dream Finders Homes, Inc. (DFH - Free Report) , PulteGroup, Inc. (PHM - Free Report) and NVR, Inc. (NVR - Free Report) .

Dream Finders Homes currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Dream Finders Homes’ earnings per share (EPS) estimates for 2024 have increased to $2.81 from $2.62 over the past 30 days. This Jacksonville, FL-based homebuilder has been benefiting from the strategy of focusing on managing construction times and increasing inventory turnover.

PulteGroup currently carries a Zacks Rank #2 (Buy). The company is benefiting from its operating model, which strategically aligns the production of build-to-order and quick-move-in homes with applicable demand across consumer groups.

PulteGroup’s EPS estimates for 2024 have increased to $11.37 from $11.33 over the past 30 days.

NVR is engaged in the construction and sale of single-family detached homes, townhomes and condominium buildings, all of which are primarily constructed on a pre-sold basis. Unlike other homebuilders, NVR’s sole business is selling and building quality homes by typically acquiring finished building lots without the risk of owning and developing land in a cyclical industry.

NVR currently carries a Zacks Rank #2. EPS estimates for 2024 have increased to $415.39 from $412.00 over the past 30 days.

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