Pulte to Buy Centex in $1.3B Deal

Pulte Homes Inc. (PHM) said Wednesday it would acquire Centex Corp. (CTX) Wednesday in a stock-for-stock deal valued at $1.3 billion that will create the nation’s largest homebuilding company. The merger comes as many of the nation’s home builders are struggling amid a recession and steep price correction in the nation’s most populous housing markets. The $1.3 billion deal includes $1.8 billion in debt, the companies said in a press statement. Centex shareholders will receive 0.975 shares of Pulte common stock for each share of Centex they own, under the merger terms; that places the value of Centex shares at $10.50, well above their $7.62 closing price Tuesday. The combined company currently would have an equity market capitalization of $4.1 billion, and an enterprise value of $7.2 billion. The merger clearly is an effort by both builders to weather a historic downturn in the new home building market, with Pulte president and CEO Richard Dugas, Jr. saying that the merger “puts us in an excellent position to navigate through the current housing downturn, poised to accelerate our return to profitability.” Centex CEO Timothy Eller sounded downright bullish. “By acting decisively now, we’re creating unrivaled firepower to capitalize on the opportunities in homebuilding that are now becoming visible on the horizon,” he said in a press statement. The company called the deal a merger, but it’s really an acquisition; the all-stock deal will leave Pulte stockholders with roughly 68 percent of the combined business. and Centex shareholders will own the remaining 32 percent. The combined business will operate under the Pulte name, as well. with Dugas retaining the rains as chief executive; Centex’s Eller will join the board and “will serve as a consultant to the company for two years following the close of the transaction,” the companies said. It’s unclear what the merger means for many of Centex’s local work forces, particularly in Texas, where the builder has a strong local presence; the companies said only that they plan “to maintain a significant presence in Dallas,” but offered no further details. Write to Paul Jackson at [email protected].