Centex and Pulte to merge

14 April 2009

Centex and Pulte Homes have agreed to merge to create the largest house builder in the US. The all shares deal will create a company with 2008 pro forma revenues of US$ 11.6 billion, selling 39000 homes last year.

Under the agreement, which has been approved by both companies' boards, shareholders in Centex will receive 0.975 Pulte shares for each Centex share they hold. The companies say this equates to US$ 10.50 per Centex share, a 33% premium on the 20-day average immediately prior to the announcement being made.

The deal, valued at US$ 3.1 billion including US$ 1.8 billion of net debt, will see Pulte's current shareholders owning about 68% of the combined company, while Centex owners would hold the remaining 32%. The combined company will have a capitalisation of some US$ 4.1 billion.

Commenting on the merger, Pulte president and CEO Richard J. Dugas said, "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."

The companies expect to make annual savings of some US$ 350 million following the merger. The company will be led by Mr Dugas, with Centex's current chairman and CEO Timothy Eller joining the board as vice chairman. Pulte founder, William J. Pulte, will continue to serve as Chairman.

Global standings

Last year Pulte was ranked 34th in iC's league table of the world's 200 largest construction companies, while Centex was in 40th position. There were two US house builders ahead of them in the table - D R Horton in 29th place and Lennar at no. 31.

The merger between Pulte and Centex is likely to see it overtake these, but it will not be the world's largest house builder. That honour is held by Japan's Daiwa House, which had sales of JPY 1709 billion (US$ 17.1 billion) last year. Sekisui House, also of Japan, was also larger then the combined Pulte/Centex revenues of US$ 11.7 billion, with sales last year of JPY 1514 billion (US$ 15.2 billion).

The deal is subject to regulatory approval, and is expected to close in the third quarter of 2009.

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