Pulte acquires Centex for $1.3bn

Pulte acquires Centex for $1.3bn
By Alan Rappeport in New York
Copyright The Financial Times Limited 2009
Published: April 8 2009 13:41 | Last updated: April 8 2009 15:03
http://www.ft.com/cms/s/0/0e633ed8-2437-11de-9a01-00144feabdc0.html


Pulte Homes agreed to acquire Centex Corporation on Wednesday in a $1.3bn all-stock deal that would create the largest US homebuilding company.

The Michigan-based Pulte will control 68 per cent of combined company, as Centex shareholders will receive 0.975 Pulte common shares in exchange for each of their own. The deal values Centex shares at $10.50, a 32.6 per cent premium on the stock’s 20-day average.

Homebuilders have been under severe pressure during the recession as the US housing market collapsed and credit disappeared. The combined company will have $3.4bn in cash and a market capitalisation of $4.1bn.

“Combining these two industry leaders with proud legacies into one company puts us in an excellent position to navigate through the current housing downturn, poised to accelerate our return to profitability,” Richard Dugas, Pulte’s chief executive, said in a statement.

The merger will give Pulte a stronger footing in Texas and the Carolinas, where Centex has a large presence. Mr Dugas will be chief executive of the combined company, which will retain the name Pulte. Timothy Eller, Centex’s chief executive, will be vice chairman of the board of directors and will consult for the new company for two years.

“We believe this is the right combination at the right time in the business cycle,” Mr Eller said in a statement. “By acting decisively now, we’re creating unrivalled firepower to capitalise on the opportunities in homebuilding that are now becoming visible on the horizon.”

The US housing market has shown some renewed signs of life in recent months in spite of prices remaining depressed. In February housing starts grew for the first time in eight months, rising by 22.2 per cent from January to an adjusted annual rate of construction of 583,000.

However the National Association of Homebuilders’ index of industry sentiment has continued to hover at historical lows as most potential buyers continue to wait for the stricken market to find a bottom.

Pulte expects that the deal will generate $350m in annual savings as it shrinks overhead and retires debt. Last year Pulte and the Texas-based Centex combined to generate $11.6bn in revenue and delivered 39,000 closings in 59 markets across the US.

Shares of Pulte fell by 4.83 per cent to $10.25 in early trading on Wednesday. Centex shares surged by 27.56 per cent to $9.72 a share.