Wow! Pulte Homes (PHM) is taking over Centex (CTX) in a $3.1 billion deal. Considering how lousy the housing market is, it’s pretty amazing they got this deal done.
Centex shareholders will receive 0.975 shares of Pulte each share of Centex they own. Based on Pulte’s close yesterday, the deal has a value of $10.50 per Centex share, a premium of 32.6% to the 20-day volume weighted average trading price of Centex's shares. The combined company currently would have an equity market capitalization of $4.1 billion and an enterprise value of $7.2 billion. On closing of the deal, Pulte shareholders will own 68% of the combined company, and Centex shareholders will own about 32%.
While I don’t have the cajones to buy a homebuilding stocks, this deal could make Pulte a monster in the long run. An awful lot of small homebuilders are going out of business because of liquidity/credit concerns, and this transaction is a major market-share builder.
So the missing part of the equation remains, when? Unemployment is on the rise and consumers are rightfully fearful of the future. Housing prices still need to come down to spur mass buying again.
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