Pulte Acquires Centex

April 8 (Bloomberg) — Pulte Homes Inc. agreed to buy Centex Corp. for $1.3 billion in an all-stock deal that creates the largest U.S. homebuilder by revenue and throws each of them a lifeline in the worst housing decline since the 1930s.

The first consolidation of publicly traded homebuilders since the bursting of the real estate bubble may also be the last because it’s easier to buy land than take on the troubles of rivals, said Ivy Zelman, a former Credit Suisse Holdings analyst who now runs her own New York-based research firm. The 13 largest U.S. homebuilders have lost 81 percent of their value since the July 2005 peak, according to Standard & Poor’s.

Centex, which initiated the sale, and Pulte are betting that by combining companies they will be better able to survive the longest housing slump since the Great Depression, with new home sales down more than 75 percent since their 2005 peak.

“This is really good because not only are there too many homes, there are too many homebuilders,” said Vicki Bryan, a senior high-yield bond analyst for New York-based Gimme Credit LLC. “Cash is king and this gives them $3.4 billion, the most in the industry, which means they don’t need the banks.”

Pulte agreed to pay 0.975 of a share for each Centex share, valuing Centex at $10.50, or 38 percent more than yesterday’s closing price, the Bloomfield Hills, Michigan-based company said today in a statement. The transaction, approved by both companies’ boards, includes $1.8 billion in net debt.

If I thought either company built good houses, I *might* be saddened by the news. As it is, I wouldn’t buy one of their houses or lose any sleep if they were both to go out of business. I consider the nationwide building companies to be a huge part of why the housing market is so overbuilt in Florida.

/And why insurance rates are so high.


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