Berkshire Hathaway is targeting a homebuilder for its first major acquisition since the retirement of Warren Buffett, tapping into a sector where sluggish sales are pushing consolidation and luring international capital.
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The money management behemoth under CEO Greg Abel is planning to take Taylor Morrison private in an all-cash deal that would give the U.S. homebuilder a $6.8B equity value and shareholders a 24% premium on the stock’s Friday closing price.
Berkshire Hathaway’s $72.50-per-share deal to take Taylor Morrison off the public market is expected to close by the end of the year, pending shareholder approval. The homebuilder, which also has a build-to-rent business, will continue operating as an independent company with current management staying in place, according to a release.
Taylor Morrison CEO Sheryl Palmer framed the deal as an opportunity to unlock growth that wasn't available on the public market.
“Berkshire Hathaway's long-term orientation is uniquely well-suited to the multi-year investment cycle of homebuilding, and this combination will allow us to scale the Taylor Morrison platform in ways that would not be possible as a standalone company,” she said in the release.
The 95-year-old Buffett, who left the CEO post on Jan. 1, told CNBC’s Becky Quick the acquisition was led by Abel and complimented him on the deal.
“Greg did that faster than I could have done it, smoother than I could have done it, and I never talked to the CEO. He has launched,” Buffett said.
Berkshire Hathaway stock was trading down roughly 1% in early trading Monday.
Taylor Morrison had $1.3B in revenue from first-quarter home closings, down from $1.8B a year prior, with a 20% margin on each sale. Net quarterly sales totaled 2,914 units, down 14% from the prior year, at an average sale price of $603K, according to its first-quarter results, posted on April 22.
The homebuilder is currently selling 365 communities and spent $503M on development in the first quarter. Its lot supply sat at 75,626 sites at the end of the first quarter, which the firm forecasts represents 6.2 years of supply.
Taylor Morrison also launched Yardly, its build-to-rent business, in 2022 and has grown the segment to more than 40 communities in nine markets and $3B in project banking capacity, according to a presentation posted along with its first-quarter results.
Berkshire Hathaway’s purchase comes after Japanese logging giant Sumitomo Forestry Co. reached a $4.5B deal in February to take Tri Pointe Homes private in its own all-cash deal.
Sumitomo also acquired build-to-rent developer Southern Impression Homes in 2023. A year later, Japanese builder Sekisui House, which operates in the U.S. as SH Residential Holdings, paid $4.9B to acquire M.D.C. Holdings to combine with its other U.S. holdings to be the sixth-largest builder in the U.S. by volume, CNBC reported.
Japanese firms own at least 33 U.S. homebuilders and control close to 6% of market share, per CNBC.
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