In a major deal that could reshape the housing industry, public builder Pulte said today that it would acquire fellow public builder Centex in a $3.1 billion, stock for stock agreement with $1.8 billion in net debt. If approved by shareholders, the deal would create the country’s largest home builder, with 39,000 combined closings in 2008 and pro forma revenue of more than $11 billion.

D.R. Horton, the next largest builder, closed 23,915 homes in 2008, according to preliminary BUILDER 100 data.

"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 CEO Richard J. Dugas, who will also lead the merged firm, which will keep the Pulte name. (Centex CEO Tim Eller will join Pulte’s board of directors as vice chairman and will be a consultant to Pulte for two years after the deal.)

Like so many builders, both Pulte and Dallas-based Centex have been hammered by the housing downturn. Centex, for example, lost $976 million and closed just 3,405 homes (a 49% drop year-over-year) in its third quarter, which ended Dec. 31, 2008. In the same time frame, Pulte lost $338.2 million and closed 5,474 homes, which represented a 37% year-over-year drop for the Bloomfield Hills, Mich.-based builder.

This deal is expected to save the combined firm $350 million annually, mostly in overhead ($250 million), but also in debt relief ($100 million). It will also create a public builder with the “strongest liquidity among its peer group,” according to a joint press release issued by Pulte and Centex, with more than $3.4 billion in cash as of March 31, 2009.

It represents an interesting play for Pulte, according to housing analyst Ivy Zelman of Zelman & Associates.

"Our initial reaction is that [Pulte] has cemented itself as one of the strongest survivors of this downturn at a time when competitors are failing by the day, solidly positioning itself across the country, supported by a healthy balance sheet," she noted in a preliminary evaluation of the deal this morning. "However, we believe the question of whether bigger is better remains unanswered in the homebuilding industry, we are concerned that the company will remain saddled with land that could prove to be a drag on returns if volume does not substantially improve and wonder whether buying legacy assets underwritten by another party is the highest potential return investment."

Alison Rice is senior editor, online, at BUILDER magazine.