Wednesday, April 8, 2009

Pulte Homes, Centex Merge

From the Associated Press Pulte Homes agrees to buy Centex in $1.3B deal

…The transaction, which also includes $1.8 billion of debt, will combine Pulte's strength in active-adult and retirement housing with Centex's hefty market share of first-time homebuyers.

The acquisition also will give Pulte large tracts of land in Texas and the Carolinas, two of the most resilient real estate markets. But Wall Street analysts are concerned about the risk of taking on so much land in other areas where home prices are still plummeting.

The new company, which will keep the Pulte name and headquarters in Bloomfield Hills, Mich., will have cash reserves totaling $3.4 billion and pay off $1 billion in debt by the end of the year.

…The pairing of Pulte and Texas-based Centex comes at a time when homebuilders are still struggling to find their footing as credit remains tight and potential customers remain leery of buying a home in the face of rising unemployment. The industry in turn has attempted to stem the bleeding by drastically scaling back new construction and slashing prices to unload existing inventory.

Combining their operations the two companies will save about $350 million a year, including $250 million in overhead. There will be layoffs, but Dugas said it was too early to predict how many.