KB Home agrees to sell French division
KB Home, the Westwood-based builder that has had two years of falling profit, said Wednesday that it agreed to sell its French subsidiary, Kaufman & Broad, to PAI Partners for 601 million euros ($812 million).
PAI, a Paris-based buyout firm, will pay 55 euros a share for a 49% stake in Kaufman & Broad, the largest home builder in Paris, KB Home said. PAI also will buy stock owned by Kaufman & Broad Chief Executive Guy Nafilyan to own more than 50% of the company.
“Kaufman & Broad has an outstanding track record of growth and generates superior margins,” PAI said. “We will support the management in its plans to expand the business including through acquisitions.”
KB Home CEO Jeffrey Mezger wants to quit France, where the firm has operated since 1968, to focus on weathering the worst slump in demand in the U.S. for new homes in 16 years. KB Home profit fell 84% in the three months ended Feb. 28; its backlog of ordered houses slid 46%.
KB Home approved the proposed sale, which doesn’t need the consent of shareholders. KB Home shares fell 21 cents to $46.21.
Nicolas Sarkozy, France’s new president, plans to introduce legislation to make mortgage repayments partially tax deductible in an effort to bolster the slowing housing market. That would help companies such as Kaufman & Broad.
Rising prices, higher borrowing costs and reduced tax breaks linked to investment in rental accommodation have caused French housing starts to decline as developers report rising inventory and slowing demand. Housing starts dropped 6.7% in the first quarter from a year earlier.
