Buyout forms largest U.S. home builder

NEW YORK (AP) — Pulte Homes Inc. is buying Centex Corp. for $1.3 billion in stock in a deal that will create the nation’s largest home builder and could spark further consolidation in an industry that is suffering the worst real estate recession in a generation.

The transaction will combine Pulte’s strength in active-adult and retirement housing with Centex’s hefty market share of first-time home buyers. The acquisition also will give Pulte large tracts of land in Texas and the Carolinas, two of the most resilient real estate markets, and a presence in 29 states and Washington, D.C.

The new company, which will also include the Del Webb, DiVosta and Fox & Jacobs brand homes, will keep the Pulte name and headquarters in Bloomfield Hills, Mich.

“It allows us to not only survive, but thrive in any economic climate,” said Richard Dugas Jr., Pulte’s president and chief executive, who retain those titles over the combined enterprise.

Faced with a 75 percent slide in new-home sales from the peak in mid-2005, home builders have slashed construction, and prices but have been slow to join forces. Wednesday’s deal touched off investors’ speculation that other home builders with battered stock prices may be easy targets.

Shares of Beazer, Lennar and Hovnanian all jumped than 7 percent in midday trading.

This deal “is a game-changer, pure and simple,” said Centex Chairman and Chief Executive Timothy Eller, who will become Pulte’s vice chairman and will work as a consultant for two years after the acquisition’s completion.

The combined company will have twice the revenue of its next largest rival, D.R. Horton Inc. Pulte and Centex pulled in a total of $11.61 billion in the last 12 months, compared with D.R. Horton’s $5.82 billion.

The new industry behemoth will be better poised to take advantage of the market’s recovery, which executives said is just beginning. On Wednesday, new data showed loan applications to purchase a home rose 11 percent last week. And new-home sales climbed almost 5 percent from January to February, providing some hope that the sales may have reached a bottom.

Pulte stockholders will own about 68 percent of the combined business, and Centex shareholders will own the remaining 32 percent.