Sumitomo Forestry takes stake in Metricon as Japanese bet on Australian home builders
The Japanese giant has bought a majority stake in Australia’s largest home builder, paving the way for it to take full control in coming years.
Sumitomo Forestry has bought a majority stake in Australia’s largest home builder, Metricon, in a deal that values the company at about $230m and paves the way for the Japanese giant to take full control in coming years.
The Japanese company has taken a 51 per cent stake in the company for $115m, adding to its local home building empire which includes Henley Homes, Edgewater Homes, Scott Park and Wisdom.
The move reflects the fact that foreign companies are taking big bets on the local housing market – Stockland and Thai-owned group Supalai have just bought a $1.3bn portfolio of housing estates from Lendlease – and also the rise of Japanese investors in real estate, where housing has been a focus.
Metricon reported a financial turnaround of nearly $80m for the 2024 financial year after teetering on the brink two years ago when it was hit by had taken on thousands of fixed-price building contracts just as supply chain problems, bad weather and a pandemic era sales rush hit.
Metricon’s backers undertook a major recapitalisation and won crucial government contracts. Despite building fewer homes it kept its position as the country’s top home builder and generated earnings before interest, taxes, depreciation, and amortisation of $42.2m, a turnaround on the prior year’s loss of $33.5m.
Under the deal, Sumitomo Forestry will acquire the initial stake in Metricon, and have a pathway to take full ownership, with an earn-out over five years to determine pricing.
Sumitomo Forestry, known for its global expertise in real estate and wood-related industries, has a strong track record of investments in the Australian home building industry, and will look to reposition Metricon.
The company has stabilised after a tumultuous period when a combination of rising costs and a home building boom forced governments to intervene to aid the company and its founders to recapitalise the operation.
Metricon chief executive Brad Duggan said that after months of discussions and negotiation the strategic partnership “marks the beginning of a new chapter” for the company.
“Metricon has worked hard over the past 24 months to return the group to its position of strength, and we are ecstatic that this work has resulted in the establishment of such an important partnership with Sumitomo Forestry. This partnership enhances Metricon’s readiness to respond to the opportunities in the Australian housing market,” he said.
“The Australian housing industry, more than ever, needs strong participants to solve the issues it currently faces, and this partnership will further build Metricon’s market leading position. Together we are confident we will build a well-considered, long-term strategic future for Metricon, our team and customers,” he added.
Metricon has built a dominant brand presence across Australia, especially in the key east-coast markets of Victoria, NSW, southeast Queensland, and South Australia. As part of the deal, Metricon will become a consolidated subsidiary of Sumitomo Forestry, which is listed on the Tokyo Stock Exchange.
Mr Duggan said that under the terms of the deal, Metricon would retain its unique operating model. “The owners and shareholders of Metricon are proud to embark on this exciting new chapter in the company’s rich history. This strategic partnership with Sumitomo Forestry strengthens our position in the industry and presents an extraordinary opportunity for future growth,” he said.
Sumitomo Forestry managing director Yasuhiro Odagane said the move would aid the company in its goal of addressing the longstanding housing shortage in Australia. “This acquisition enables our group to expand the business areas in each state, establishing Sumitomo Forestry as the number one builder in Australia and, most importantly, allowing us to make a substantial contribution to the provision of social infrastructure,” Mr Odagane said. Sumitomo Forestry Group entered Australia’s housing industry in 2008 and has been expanding its business in major cities ever since.
Metricon, founded in 1976 by George Kline and the late Mario Biasin, is headquartered in Melbourne and employs a dedicated team of more than 2500.
Sumitomo Forestry has about 10 times as many staff and a wide-ranging business empire.
Mr Duggan said the owners had been looking for a “custodian” of the business and “not just a capital partner”. “The owners have been looking for someone who’s going to take this forward for the next 50 years,” he said.