The Pulte-Centex engagement has been solid for four months now, with the betrothed even making plans to pay off each other's debts, but on Tuesday, Aug. 18, it will be clear whether the company's shareholders are on board with the union when their votes are tallied and the companies' boards vote in separate meetings.
There's been little recent noise about objections to the merger, which is scheduled to be complete by the end of the third quarter if all parties, including the Securities and Exchange Commission, are in favor of the union.
It's not a merger of equals. Under the proposed terms, Pulte expects to issue about 128.1 million shares of Pulte common stock to Centex stockholders. Immediately after the merger, current Centex shareholders are expected to own approximately 32.1% of Pulte's common stock, and Pulte shareholders will have 67.8%.
It's pretty clear most everybody's going to be living at Pulte's house, and a lot of Centex people won't be coming along. The new company will essentially be managed by Pulte's top executives. Centex's chief executive Tim Eller has a two-year gig as vice chairman of the new company, but few of the other Centex executives are guaranteed a seat at the executive table.
And Centex won't be keeping its name. The new company will be called PulteGroup.During a recent conference call, Pulte CEO Richard Dugas said best practices will be taken from both companies to create a "new company," but he hasn't elaborated on what Centex best practices will be carried over. Although Pulte's recent emphasis on focusing on selling better margined to-be-built homes over speculative houses is a reflection of Centex's most recent business strategy.
While the merger would create the largest home building company in the country, Dugas has said it's not about size, but rather creating synergies and complementary land positions. Reductions in redundancies could amount to savings of $250 million a year or more.
Centex has a bigger share of the entry-level pie with its Fox & Jacobs brand, while Pulte's Del Webb has perhaps the strongest brand recognition in the active adult market.Both companies have kept top spots in J.D. Power and Associates' annual customer service ratings.
Pulte's board is scheduled to meet at 10 a.m. Eastern time in Pontiac, Mich., while Centex's is scheduled for two hours later at 11 a.m. Central time in Dallas.
The Pulte shareholders are being asked to approve four proposals: the issuance of new Pulte stock to be given to Centex stockholders in exchange for their Centex stock; changing the name of the company from Pulte Homes to PulteGroup; increasing the amount of common stock Pulte is authorized to issue from 400 million to 500 million shares; and voting to adjourn the meeting to solicit more proxies if there aren't enough votes cast in favor of the first and second proposals.
The Centex agenda is simpler: Those stockholders will vote on the merger plan itself, which would subsume Centex into the new PulteGroup; the approval to vote to adjourn the meeting to solicit more proxies if there aren't enough votes cast in favor of the merger; and to transact any other business that might come up that day.