Centex, Pulte deal good for industry; investors study Legacy bid; Cox Radio shareholders expect more

By Cristal Cody

Tupelo, Miss., April 8 - Investors sent shares of Centex Corp. up $1.44, or 18.90%, to close at $9.06 on Wednesday after Pulte Homes, Inc. said it will acquire the company and create the world's largest homebuilder in an all-stock deal valued at $3.1 billion.

On the flip side, Pulte's stock lost $1.13, or 10.49%, to close at $9.64.

In other deals, an analyst said Wednesday that Legacy Reserves LP's board should accept Apollo Management VII, LP's $435 million cash offer.

Also on Wednesday, shareholders of Cox Radio Inc. continue to trade shares up as the buyout offer's expiration nears.

Meanwhile, the Centex deal was credited with helping to lift the markets Wednesday.

The Dow Jones Industrial Average closed up 47.55 points, or 0.61%, at 7,837.11.

The Standard & Poor's 500 index added 9.61 points, or 1.18%, to close at 825.16, while the Nasdaq Composite index rose 29.05 points, or 1.86%, to 1,590.66.

Mega builder

Pulte shareholders will own 68% and Centex shareholders will own 32% of the combined company.

Under the terms, Centex shareholders will receive 0.975 of a share of Pulte for each share of Centex. The deal is valued at $10.50 per Centex share and represents a 38% premium to Centex's closing price of $7.62 on Tuesday.

Centex shares have traded from $4.91 to $26.09 over the past year.

"One would expect consolidation in this industry given how hard the housing market has been hit, so this should be considered good news for the group," Bill O'Grady, chief market strategist with Confluence Investment Management LLC, said Wednesday.

The combination with Pulte allows Centex to "get a jump on the rest of the industry," Tim Eller, chairman and chief executive of Centex, said on the conference call with analysts on Wednesday.

"This combination is a game changer, pure and simple," Eller said. "It's the right transaction at the right time."

Richard Dugas, president and CEO of Pulte, said on the call that the company has seen small signs of a housing market rebound, but analysts were concerned about the large amount of land the company will take on with the acquisition.

The combined company will own more than 50,000 finished lots. Dugas insisted that the lots are not "B and C" properties from Centex, but land that is located in key markets such as Texas.

The deal must be approved by Pulte and Centex shareholders and receive regulatory clearances.

Key Pulte and Centex executives have agreed to vote their shares in favor of the merger.

The companies expect to complete the deal in the third quarter of 2009.

Bloomfield Hills, Mich.-based Pulte's operations include the DiVosta Florida home brand and the Del Webb home brand, which made it the top builder of active communities for people ages 55 and up after its 2001 acquisition.

Dallas-based Centex is geared toward first-time homebuyers with homebuilding brands that include Fox & Jacobs Homes and CityHomes.

Legacy Reserves

Private equity firm Apollo Management made the offer on Friday to acquire Legacy's outstanding units for $14.00 each in cash, a 40% premium to Friday's closing unit price.

The bid is probably the highest offer Apollo will make for the Midland, Texas, oil and gas company, an analyst said Wednesday.

"A bump in the offer terms seems unlikely," the analyst said.

Still, the company's units continue to trade down.

On Wednesday, units of Legacy fell 9 cents, or 0.70%, to close at $12.73.

Legacy's board said in a statement that a special committee will review the offer.

Cary Brown, the company's CEO, said that if Legacy's board approves the deal, he and other executives that together own about 21% of outstanding units will support the deal, Legacy Reserves said.

Legacy Reserves is a master limited partnership with only a 41% public ownership.

"We believe that Legacy's board is likely to enter into an agreement with Apollo," the analyst said. "We would not rule out terms and conditions which would make it easy for Apollo to walk ... including conditions relating to the price of oil or the credit market."

Cox Radio higher

Cox Enterprises, Inc. made the cash offer of $3.80 a share for the remaining shares of Cox Radio on March 23.

Shares have not fallen below $4.00 since the offer was made.

On Wednesday, shares of Cox Radio gained 6 cents, or 1.49%, to close at $4.10. The stock has traded from $2.90 to $13.09 over the past year.

The tender offer expires on April 17.

Cox Enterprises already owns a 78% interest and holds a 97% voting interest in Cox Radio.

Mentioned in this article:

Centex Corp. NYSE: CTX

Cox Radio, Inc. NYSE: CXR

Legacy Reserves LP NasdaqGH: LGCY

Pulte Homes, Inc. NYSE: PHM

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.