British homebuilder Taylor Wimpey (TW.L) could sell its U.S. homebuilding subsidiary Taylor Morrison to current management, a private builder or private equity firms, people familiar with the matter said.
The bank advising Taylor Wimpey, JPMorgan Chase (JPM.N), received a bid from at least one private U.S. builder, a source familiar with the matter said.
Other sources said private equity firms, including Starwood Land Ventures and hedge fund billionaire John Paulson’s Rain Tree Investment Corp, are also evaluating the deal. Those firms could retain the current management team, which wants private equity backing to buy the company.
The lingering U.S. housing slump scared off public homebuilders, however, who despite robust cash positions and a need for cheap land could not stomach the risk of taking on Taylor Morrison’s significant holdings in Florida and Arizona, two states especially hard-hit by the downturn.
Taylor Morrison is a wholly owned subsidiary of Taylor Wimpey that builds housing in California, Arizona, California, Colorado, Florida and Texas. In 2009, it was the thirteenth-largest U.S. homebuilder according to trade publication Builder Magazine.
The parent company is not enthusiastic about the U.S. management’s move to take control of the company with financial backing from outside sources, another source familiar with the matter said.
To retain the current leadership, the buyer would have to pay a premium that might make the deal less attractive to potential buyers, several sources pointed out.
“They want the assets, not the people,” one said.
At the end of the first half of 2010, Taylor Wimpey put the cost of its U.S.-owned land at $559.6 million. Volatile home prices and the difficulty of knowing from the outside the methodology Taylor Morrison uses to write down the value of its land make any price estimate mostly guesswork at this point in the sale process.
Taylor Morrison’s sale price is guesswork at this point.
It has said that it wants to sell Taylor Morrison in combination with its Canadian operations, Monarch Homes, but will consider selling them separately, a source said.
Taylor Wimpey, which also has operations in the United Kingdom and Spain, could not be reached for comment.
(Reporting by Helen Chernikoff; additional reporting by Soyoung Kim; Editing by Richard Chang)