Pulte Merges (BUYS) Centex Homes!
Pulte Homes Inc. agreed to acquire Centex Corp. Wednesday in a stock-for-stock deal valued at $1.3 billion that will create the nation’s largest homebuilding company.
The transaction, which also includes $1.8 billion of debt, will give the combined business a strong liquidity position with more than $3.4 billion in cash as of March 31.
The pairing of Pulte and Centex comes at a time when homebuilders are still struggling to find their footing as credit remains tight and buyers continue to be leery of big-ticket purchases. The industry in turn has attempted to stem the bleeding by drastically scaling back new construction and throwing more incentives at potential buyers in order to unload existing inventory.
The companies called the deal a merger, but Pulte stockholders will own about 68 percent of the combined business and Centex shareholders will own the remaining 32 percent. The acquisition comes a little over a month after Pulte adopted a shareholder rights plan to help preserve the value of some deferred tax assets generated by net operating losses, as well as other tax benefits.
The newly combined company will have access to more than 59 U.S. markets and gives Pulte access to Centex’s land holdings in Texas as well as North and South Carolina.
Pulte and Centex contend that the deal will help them capitalize on what many see as a bit of an uptick in the housing market. Last month the Commerce Department said new home sales climbed 4.7 percent in February, providing some hope that the sales may have reached their bottom and are on their way toward a recovery.
“We believe this is the right combination at the right time in the business cycle. By acting decisively now, we’re creating unrivaled firepower to capitalize on the opportunities in homebuilding that are now becoming visible on the horizon,” Centex Chairman and CEO Timothy Eller said in a statement.
The acquisition, which was unanimously approved by both homebuilders’ boards, is expected to close in the third quarter. It is expected to qualify as a tax-free reorganization.
