It was only a matter of time before the big homebuilders started a much-needed wave of consolidation. Now, the big publicly traded companies are finally agreeing to pair off in hopes they'll be able to wait out the time it takes to reduce the huge glut of homes built during the real estate boom.
Today, Centex and Pulte join forces to raise enough capital to ride out the rest of the bust. They may have it, with some $3.4 billion in the newly combined company plus expectations of annual costs savings in the $350 million range. The all-stock deal looks like this: Pulte pays 0.975 of a share for each share of Centex, which values Centex at a 38 percent premium to yesterday's close, the companies said. The $1.3 billion deal comes with $1.8 billion in net debt, and creates the largest homebuilder in the country by market cap.
Pulte CEO Richard Dugas said in a conference call that more consolidation among builders is on the way, and that the first to act would emerge in the strongest position once the sector recovers. With housing still barely hinting that it has finally hit bottom, expect more big deals soon.
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Muser of NM 12:15PM April 08, 2009