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December 10, 2017

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Pulte to acquire Del Webb: Takeover to create nation’s largest builder of homes

Del Webb Corp. of Phoenix, one of Las Vegas' largest homebuilders, has agreed to a $1.8 billion takeover by Michigan-based Pulte Homes Corp., a move that will create the nation's largest builder of homes.

The deal will combine Las Vegas's second- and third-largest homebuilders. Del Webb and Pulte sold nearly 2,750 homes last year in Las Vegas in 13 communities. However, the combined companies will still trail KB Homes, which sold 3,010 homes in Las Vegas last year.

If approved by Del Webb and Pulte shareholders, the deal is expected to close within three months. Pulte will pay stock valued at $800 million and assume $1 billion of Del Webb debt. Pulte is paying $40.51 in stock for each share of Del Webb stock, a nice premium compared to Del Webb's closing price of $33.80 on Monday. Del Webb stock rose $4.60 on the news this morning.

Del Webb is best known today as a developer of retirement communities across the United States under its "Sun City" brand. In Las Vegas, it has developed Sun City communities in Summerlin and MacDonald Ranch in Henderson; both are sold out.

Del Webb is focusing its sales efforts on the 5,000-acre Anthem community in Henderson, which will eventually contain more than 12,000 homes. Sales on this project began in 1999.

The Del Webb name will be retained by a Pulte group operating out of Phoenix.

"It's obviously an aggressive move (by Pulte) to acquire a company that large, but also a good move to capture market share immediately, especially in Las Vegas, where the fastest-growing segment is the adult segment," said Dennis Smith, president of Las Vegas-based Home Builders Research.

Del Webb employs about 750 people in Las Vegas, while Pulte employs 100. However, workforce impacts should be minimal, Pulte officials said this morning. Del Webb issued a statement saying the merger "should have very little impact on Southern Nevada operations" and that sales at Anthem will continue as planned.

"I want to emphasize that we will be seeking to minimize workforce effects from this merger," said Robert Burgess, chairman and chief executive of Pulte.

In Las Vegas, "we're not anticipating any (major changes) in the short run, but in the long run, we just don't know," said Sean Patrick, local spokesman for Del Webb. "We really don't know what the future will hold at this point. It's so early in this process."

However, Patrick said Del Webb plans to proceed with American Nevada Corp. on a joint venture in North Las Vegas. The Bureau of Land Management will auction 1,750 acres of land in North Las Vegas in nine days, and the two companies plan to bid on that land parcel. If successful, the companies have previously said they plan to develop three separate "villages" on the land, including an age-restricted community by Del Webb.

American Nevada -- developer of the Green Valley master planned community -- would be the managing partner of the project. American Nevada is owned by the Greenspun family, owner of the Las Vegas Sun.

Del E. Webb, founder of the Phoenix-based Del Webb, first entered the Las Vegas market in 1946, when Benjamin "Bugsy" Siegel made him the general contractor of the Flamingo Hotel, a property generally acknowledged as the first major gaming resort on the Las Vegas Strip.

From that contract, Del Webb established an empire in the gaming industry. Over the next several decades, it built Caesars Palace, the Las Vegas Hilton, the Sahara, the Riviera and the old Aladdin.

In 1961, Del Webb became a casino owner as well, purchasing three Las Vegas casinos -- the Sahara, the Mint (now part of Binion's Horseshoe) and the Lucky Strike (now the Golden Nugget). By 1972, Del Webb became the state's largest gaming operator and largest private employer, with eight hotel-casinos scattered throughout the state.

But in the 1960s, Del Webb had started another booming business -- the development of Sun City retirement communities. In the mid-1980s, Del Webb decided to divest the company's gaming properties and focus on residential developments. The company sold off its last gaming property in 1988, and Del Webb employment sank from 12,000 in 1980 to 500 in 1990.

Del Webb began returning to prominence in Las Vegas in 1989, when it began selling homes at its first Las Vegas-area Sun City in Summerlin, which now has about 7,750 homes. Sun City MacDonald Ranch, a 2,500-home community in Henderson, followed several years later, and sold out earlier this year.

Sales are now focused on Sun City Anthem. Del Webb ranked No. 2 in Las Vegas home sales in 2000 with 1,889, Smith said.

But Del Webb's huge land holdings, lack of joint venture partners on its developments and $1 billion debt load gave many investors heartburn, and the stock has suffered in recent years. Del Webb responded by stepping up joint venture activities and selling off land, including parcels in Las Vegas.

Pulte, meanwhile, entered the Las Vegas market in 1992. The company now has 11 active developments scattered through the Las Vegas Valley, and it sold 855 houses and townhomes in the area in 2000. Prices on its Las Vegas-area homes range from $130,000 to $460,000.

Combining the two makes sense, some analysts believe.

"(Pulte tries) to attract repeat buyers by building homes for all stages of life, starting with first-time buyers," said analyst David Weaver of Legg Mason Wood Walker. "Del Webb completes the life cycle for them."

Bloomberg News

contributed to this report.

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