Pulte Agrees To Acquire Centex
The two construction companies will enter into a $3.1 billion all-stock transaction.
April 8, 2009
Residential construction company Pulte Homes has agreed to purchase its smaller competitor Centex Corporation in a $3.1 billion all-stock transaction, including $1.8 billion of debt.
The purchase price of $10.50 per Centex share – based on Pulte’s closing price on Tuesday – is a premium of about 32.6%. Centex shareholders will receive 0.975 shares of Pulte stock for each share of Centex. Upon closing, Pulte’s shareholders will own about 68% of the combined company, and Centex shareholders will own about 32%.
According to company estimates, the acquisition will save Pulte about $250 million in overhead expenses per year and $100 million in debt expense relief.
Richard J. Dugas, Jr., president and chief executive officer of Pulte said the transaction will allow the company to take advantage of “Centex's land positions to Pulte's, including Centex's sizable holdings in both Texas and the Carolinas, two areas that continue to exhibit strength in the face of today's difficult housing market."
According to a Credit Suisse analyst report obtained from ThomsonOne Analytics, similar acquisitions in the sector are unlikely. The analyst, Daniel Oppenheim, added, “Lower quality balance sheet companies also have change in control provisions that would make a transaction much more difficult.”
Pulte will remain headquartered in Bloomfield Hills, Michigan, and will retain a “significant” presence in Dallas. Dugas will be named chairman of Pulte, in addition to his current role as president and chief executive officer. Centex’s current chairman and CEO Timothy Eller will become vice chairman of the board of directors and will act as a consultant to the company.
Pulte was advised by Citi, Banc of America Securities, Merrill Lynch and J.P. Morgan Securities Inc., with Citi acting as lead financial advisor for the transaction. Sidley Austin LLP served as Pulte’s legal advisor for the transaction. Centex used Goldman, Sachs as financial advisor and Wachtell, Lipton, Rosen as legal advisor.
By press time at midday Wednesday, Pulte shares had fallen to $9.49, from $10.77 on Tuesday’s close. Centex shares closed at $7.62 on Tuesday and traded $8.97 per share as of press time at midday Wednesday.
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