By Lisa Kerner
Charlotte, N.C., April 8 - Pulte Homes, Inc. and Centex Corp. announced they will combine to form America's largest homebuilding company with an enterprise value of $7.2 billion.
Each company's board of directors approved a stock-for-stock transaction valued at $3.1 billion, including $1.8 billion of net debt, according to a joint news release.
Centex said its shareholders will receive 0.975 shares of Pulte common stock for each share of Centex they own.
The transaction, slated to close in the third quarter of 2009, has a value of $10.50 per Centex share based on Pulte's closing price on Tuesday, the companies said.
Once the transaction is complete, Pulte shareholders will own approximately 68% of the combined company, and Centex shareholders will own approximately 32%.
The combined company will operate using the Pulte name and headquarters location in Bloomfield Hills, Mich., while maintaining a "significant presence" in Dallas, where Centex is located.
Efficiency gains and other savings are expected to result in cost reductions of approximately $350 million annually, including $100 million in debt expense relief, Pulte said.
Centex and Pulte ended March with approximately $1.7 billion of cash each.
Pulte president and chief executive officer Richard J. Dugas Jr. will lead the combined company as chairman, president and CEO. Centex chairman and CEO Timothy Eller will join the Pulte board of directors as vice chairman. Both Dugas and Eller will lead the transition team.
The board of the combined company will include four current members from the Centex board, including Eller, and eight members of the current Pulte board, including company founder and current Pulte chairman William J. Pulte.
"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," Dugas said in the release. "Together we will have considerable presence in more than 59 markets across America."
Eller said the merger is "the right combination at the right time."
"By acting decisively now, we're creating unrivaled firepower to capitalize on the opportunities in homebuilding that are now becoming visible on the horizon," Eller said in the release.
Pulte is being advised by Citi, Banc of America Securities, Merrill Lynch and J.P. Morgan Securities Inc. Goldman, Sachs & Co. is financial adviser to Centex.
| Acquirer: | Pulte Homes, Inc.
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| Target: | Centex Corp.
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| Announcement date: | April 8
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| Price per share: | 0.975 Pulte shares
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| Expected closing: | Third quarter of 2009
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| Stock price of acquirer: | NYSE: PHM: $10.77 on April 7
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| Stock price of target: | NYSE: CTX: $7.62 on April 7
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