Homebuilders Pulte Homes and Centex to merge

By Steve Green

Published Wednesday, April 8, 2009 | 8:42 a.m.

Updated Wednesday, April 8, 2009 | 8:52 a.m.

Pulte Homes Inc. and Centex Corp., two homebuilders active in Las Vegas, today said they will merge in a $3.1 billion deal that will make Pulte the nation's largest homebuilding company.

The deal includes $1.3 billion in stock that Pulte will pay and $1.8 billion of debt it will assume, while the combined business has more than $3.4 billion in cash as of March 31, the companies said. The deal values Centex stock at $10.50, up 38 percent from Tuesday's close.

Both homebuilders' boards unanimously approved the transaction, in which Pulte is buying Centex.

Pulte, based in Bloomfield Hills, Mich., builds in Las Vegas under the Pulte and Del Webb brands. Centex is based in Dallas.

Pulte ranked No. 1 and Centex No. 7 in the In Business Las Vegas 2009 Book of Business Lists' ranking of homebuilders. That ranking is based on local home closings in 2007.

Dennis Smith, chief executive of Home Builders Research, a Las Vegas company that analyzes the local market, said today's deal shouldn't dramatically alter the local market as Centex had substantially reduced operations here over the past two years.

"It's another example of the big getting bigger,'' he said.

Centex, which is marketing new homes at five local neighborhoods, all in North Las Vegas, closed on 390 home sales locally in 2008, Smith said. He said Pulte closed on 1,471 homes in 2008 in the Las Vegas area.

Pulte is now marketing homes at 17 locations in Las Vegas, Henderson and North Las Vegas; while its Del Webb unit is selling homes at two developments in the Las Vegas area and one in Mesquite.

As the recession slowed the industry and Centex reduced its local presence, the local sales numbers fell from 2007, when Pulte sold 2,228 homes and Centex closed on 799 homes.

"Basically, Centex was unwinding'' in the Las Vegas area, said Smith, who added Centex had sold much of its local land holdings as it reduced its presence in the local market.

Pulte President and Chief Executive Officer Richard J. Dugas Jr. said the deal "puts us in an excellent position to navigate through the current housing downturn."

"This is really good because not only are there too many homes, there are too many homebuilders," securities analyst Vicki Bryan of Gimme Credit LLC told Bloomberg News. "Cash is king and this gives them $3.4 billion, the most in the industry, which means they don’t need the banks."

"The combination of these two industry leaders creates the premier homebuilder in the United States, positioned for growth through segment and market diversity, streamlined operations and unmatched leadership in customer satisfaction,'' the companies said in a statement.

Pulte will have Top 3 positions among new homebuilders in 25 of the top 50 U.S. markets. In 2008, Pulte and Centex reported more than 39,000 closings with combined revenue of $11.6 billion, they said.

Pulte and Centex said that as the economy improves, they look to increase their market share in existing markets while leveraging management depth, brand names and their marketing network; while obtaining improved operating leverage on their land positions. The merger, if approved, would make Pulte the nation's largest builder, surpassing current leader D.R. Horton Inc.