Skyline (SKY) to Rev Up Portfolio With Regional Homes Buyout
In a bid to solidify its position in the market, Skyline Champion Corp SKY — one of the leading homebuilders in North America — is set to acquire Regional Homes. This move represents a major shift in the housing manufacturing landscape, demonstrating the continuous evolution and growth of the housing sector.
Deal Terms
The acquisition of Regional Homes, the fourth largest HUD manufacturer in the United States, is valued at an approximate amount of $328 million, along with $130 million of assumed debt. The debt primarily pertains to inventory floor plan liabilities. Alongside the main purchase price, the agreement also entails an earnout provision and standard net working capital modifications.
To finance the acquisition, Skyline intends to utilize its cash reserves alongside $30 million worth of the company's common stock, which will come with specific restrictions. Subject to closing conditions and regulatory approvals, the acquisition is scheduled to close in the third quarter of Skyline's 2024 fiscal year.
Deal Benefits
Regional Homes has a robust presence, especially in the large markets of Alabama and Mississippi. This acquisition aligns with Skyline’s strategy to augment its retail and manufacturing distribution in these regions.
The intrinsic synergy potential further elevates the deal's appeal. Mark Yost, president and CEO of Skyline, emphasized the shared values and synergies between the two entities. Regional Homes' customer-oriented sales approach aligns seamlessly with Skyline Champion’s commitment to refining the customer buying experience. The combined expertise of both companies is expected to amplify their market presence and foster sustained growth.
The buyout will add three manufacturing facilities and 43 retail locations to Skyline's portfolio, boosting the company’s production capabilities and retail presence. With Regional Homes’ financial health — boasting sales of about 5,000 new homes and estimated revenues of $523 million in 2022 and an EBITDA of approximately $84 million — Skyline can anticipate a favorable return on investment.
Moreover,the recent partnership of Skyline with ECN Capital, coupled with the acquisition of Regional Homes, will amplify the value SKY brings to its customers, making the combined offering more potent than ever before.
Wrapping Up
The acquisition of Regional Homes by Skyline stands as a testament to the shared vision of two industry leaders, committed to fostering growth, innovation and unmatched customer experience. The deal is a step forward in advancing the manufactured housing sector. The addition of manufacturing facilities and the expansion of retail locations will position Skyline for a trajectory of robust growth and innovation.
While this powerhouse partnership bodes well for Skyline, we are concerned about the deteriorating earnings of the company amid a slowdown in the real estate market, a high interest rate environment and limited credit availability. SKY’s fiscal 2023 sales and earnings estimates imply a year-over-year decline of 23% and 48%, respectively. Fiscal 2023 and 2024 EPS estimates have been revised down by 25 cents and 30 cents, respectively, over the past 30 days. The company carries a Zacks Rank #4 (Sell).
A few top-ranked players in the same space include Meritage Homes HTH, Dream Finders Homers DFH and Century Communities CCS, each sporting a Zacks Rank #1 (Strong Buy).
You can see the complete list of today’s Zacks #1 Rank stocks here.
Meritage Homes surpassed earnings estimates in the last four quarters, the average surprise being 24.12%. The EPS estimate for 2023 and 2024 has been revised upward by $3.91 and $3.76, respectively, in the past 30 days.
Dream Finders surpassed earnings estimates in two of the last four quarters for as many misses, the average surprise being 122.72%. The EPS estimate for 2023 and 2024 has been revised upward by 55 cents and 74 cents, respectively, in the past 30 days.
Century Communities surpassed earnings estimates in the last four quarters, the average surprise being 31.11%. The EPS estimate for 2023 and 2024 has been revised upward by $1.58 and 99 cents, respectively, in the past 30 days.
Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.
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