by J. Craig Anderson – Aug. 19, 2009 12:00 AM
The Arizona Republic
Shareholders of Pulte Homes Inc. and Centex Corp. on Tuesday approved a $3.1 billion merger of the two companies, which Pulte officials said creates a new local and national market leader in home sales.
The merger will extend Pulte’s reach to first-time home buyers – the target market for Centex – while allowing Centex to benefit from Pulte’s upscale image, company officials said. Both firms’ shareholders approved the deal by an overwhelming majority.
While the combined company will retain the two distinct brands, it will be called Pulte Homes and will be based at Pulte’s existing headquarters in Bloomfield Hills, MichThe two companies hold a combined 16 percent share of the Phoenix-area market based on new-home sales closed through June 9, larger than any other builder, Pulte spokeswoman Jacque Petroulakis said.
The next-biggest Valley market-share holder is D.R. Horton Inc., the former local and national leader, with an 11 percent share, she said.
Previously, Pulte was the second-largest home builder in the Valley and nation, and Centex was No. 3.
The combined company will be better able to endure the current economic slump by consolidating operational expenses, Pulte Southwest area president John Chadwick said.
“There is tremendous value in fully leveraging our brands across all buyer segments so we can drive better results in traffic, sales and profitability,” Chadwick said via e-mail. “With the addition of the Centex brand, our brand portfolio is more balanced across all consumer segments, without leaning heavily toward one consumer segment over another.”
First-time homebuyers make up the largest share of the home-buying market – about 41 percent, up from 39 percent a year ago, according to a recent National Association of Realtors study.
The merger is a stock-only deal that leaves Pulte shareholders with 68 percent of the stock.
The new firm will trade on the New York Stock Exchange under the symbol “PHM.” The New York Stock Exchange symbol for Dallas-based Centex, “CTX,” will be retired.
Nether company’s stock saw much movement Tuesday, but both builders’ stock prices increased significantly during the past month on investor optimism that the struggling new-home industry was showing signs of recovery, Wall Street analysts said.
Pulte also owns Phoenix-based Del Webb Corp., developer of the Sun City adults-only communities and the all-ages Anthem communities.
Like most home builders, Pulte and Centex have reported huge revenue decreases in recent quarters, although Centex turned a net profit of $85.1 in its most recent quarter thanks to a $407.3 million income-tax benefit, up from a quarterly loss of $150.1 million a year earlier.
Pulte reported a second-quarter net loss of $189.5 million, compared with a $158.4 million loss a year earlier.
“This combination puts us in an excellent position to navigate through the current local and national housing downturn and accelerate our return to profitability,” Chadwick said.