Finance & Business World

Homebuilder Centex Corp. announced Wednesday its board of directors has approved a plan to merge with Pulte Homes Inc. In announcing the deal, Centex stated that the combined company will have $3.4 billion in cash on hand to weather the current homebuilding doldrums.

In the transaction, Dallas-based Centex (NYSE: CTX) shareholders will receive 0.975 shares of Pulte’s (NYSE: PHM) common stock for each share of Centex common stock.

The merger is a stock-for-stock transaction valued at $3.1 billion, which includes $1.8 billion of net debt, Centex said.

When the merger is complete, Pulte shareholders will own 68 percent of the combined home building entity, while Centex shareholders will own 32 percent.

“We believe this is the right combination at the right time in the business cycle," said Centex Chairman and Chief Executive Officer Timothy Eller said. "By acting decisively now, we’re creating unrivaled firepower to capitalize on the opportunities in home building that are now becoming visible on the horizon. We will have a deeper and more expanded presence that we are confident will allow us to begin realizing the benefits of our combined scale immediately. Moreover, our shareholders will receive an immediate premium for their shares as well as participate in the upside potential of the combined company."

At the end of March, Bloomfied Hills Mich instant cash advance.-based Pulte (NYSE: PHM) and Centex each had approximately $1.7 billion of cash on hand. Last year, both builders combined had 39,000 home closings and a combined revenue of $11.6 billion

“Combining these two industry leaders with proud legacies into one company puts us in an excellent position to navigate through the current housing downturn, poised to accelerate our return to profitability,” said Pulte President and Chief Executive Officer Richard J. Dugas, Jr. “Centex’s significant presence in the entry level and move-up categories is complemented by Pulte’s strength in both the move-up and active adult segments, the latter through our popular Del Webb brand. Together we will have considerable presence in more than 59 markets across America. In addition, both organizations share an unwavering focus on delivering unparalleled customer satisfaction, maximizing the influence of strong brands and setting new standards of achievement in operational efficiency."

The companies’ leaders added that the merger will allow the combined building entity to capitalize on Centex’s land position and holdings in key markets like Texas and in the Carolinas.

In early Wednesday trading, Centex shares were up 28% at about $9.75, and Pulte shares were down 6% at $10.12.

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