Pulte Homes to buy Centex for $1.3 billion
Pulte Homes Inc. is buying Centex Corp. for $1.3 billion in stock in a deal that will create the nation’s largest homebuilder and could spark further consolidation in an industry that is suffering the worst real estate recession in a generation.
The transaction will combine Pulte’s strength in active-adult and retirement housing with Centex’s hefty market share of first-time home buyers. The acquisition also will give Pulte tracts of land in Texas and the Carolinas, two of the most resilient markets, and a presence in 29 states and Washington, D.C.
The new company, which will include the Del Webb, DiVosta and Fox & Jacobs brands, will keep the Pulte name and headquarters in Bloomfield Hills, Mich. There will be an unspecified number of job cuts.
"It allows us to not only survive, but thrive," said Richard Dugas Jr., Pulte’s president and CEO, who will retain those titles over the combined enterprise.
Faced with a 75 percent slide in new home sales from the peak in mid-2005, home builders have slashed construction and prices but have been slow to join forces. Wednesday’s deal touched off investors speculation that other homebuilders with battered stock prices may be easy targets.
The combined company will have twice the revenue of its next largest rival, D instant credit report.R. Horton Inc. Pulte and Centex pulled in a total of $11.61 billion in the last twelve months, compared to D.R. Horton’s $5.82 billion.
The behemoth will be better poised to take advantage of the market recovery, which executives said is just beginning. On Wednesday, new data showed loan applications to purchase a home rose 11 percent last week. And new home sales climbed almost 5 percent from January to February, providing hope that the sales may have reached a bottom.
Integrating Centex’s operations will save Pulte $350 million a year. The new company will have $1.8 billion in debt and cash reserves totaling $3.4 billion. The company will pay off $1 billion in debt by the end of the year.
Pulte is offering Centex shareholders 0.975 shares of its common stock for each share of Centex that they own. The transaction is valued at $10.50 per Centex share based on Pulte’s Tuesday closing stock price of $10.77. That represents a 38 percent premium to Centex’s closing price of $7.62 Tuesday.
Pulte stockholders will own 68 percent of the combined business, and Centex shareholders will own the remaining 32 percent.