Overwhelming majorities of Pulte Homes and Centex shareholders gave their blessing to the merger of the two companies Tues. Aug. 18, approving the creation of the nation’s largest home builder.
More than 99% of shareholders who voted were in favor of the transaction. More than 80% of Pulte’s shareholders cast votes and 72% of Centex’s stock holders filled out the forms.
The merger is a stock-for-stock arrangement with Centex stockholders receiving .975 shares of Pulte Homes stock in exchange for their Centex shares. Based on that exchange rate, Pulte shareholders own about 68% of the company with Centex shareholders holding the remaining 32%.
Together, Pulte and Centex, now to be called PulteGroup, closed more than 39,000 homes in 2008 and had $11.6 billion in revenue. PulteGroup will operate in more than 900 communities in 29 states and the District of Columbia. And its brands will be cradle-to-grave, combining Centex’s first-time buyer focus with Pulte’s Del Webb active adult specialty.
The companies’ land holdings are also complementary with Pulte gaining bigger market shares in both Texas and North Carolina from the merger. Pulte’s larger Southwest and Florida presences are also brought to the table.
But the merger was about more than size and brand-land synergies. It is expected to generate $250 million in corporate and field overhead savings yearly as well as another $100 million from the extinguishment of $1.5 billion in debt. On Aug. 11 the companies announced they had tendered an offer to buy back $1.5 billion in both Centex and Pulte bonds to lower the new company’s debt levels.
"Having already invested thousands of hours in planning, we can begin integration of our organizations immediately and start capturing the cost savings and business benefits that make this merger so compelling,” said Richard Dugas, CEO of PulteGroup and former Pulte CEO, in a written statement.
As the name and the extinguishment of Centex stock would imply, the new company will be Pulte-centric with its headquarters in Bloomfield Hills, Mich. The lead executive team, too, is made up almost exclusively with Pulte alumni with the exception of former Centex CEO Tim Eller, who will serve on the company’s board of directors as vice chairman and as a consultant to the company for two years.
Despite being Pulte-heavy, Dugas has said PulteGroup will truly be a new company, taking advantage of best practices from both of its merged parents to build a better home building company.
Amid the noise of the shareholder approval of the Pultex-Centex merger a home building legend quietly took a step down from the company that still bears his name after the last merger documents were signed and stamped.
WIlliam J. Pulte stepped down as chairman of Pulte’s board of directors to be replaced by Richard Dugas, the company’s CEO. The fact was not mentioned in a press release; rather it was tucked into the 8-K form filed late Tuesday with the SEC that details the actions taken by the company’s board earlier in the day.
Pulte will, however, remains as a director and employee of the company, receiving an annual salary of $1 million. His bonus, however, was adjusted by the compensation committee to a maximum of $500,000 for 2009 and cut him out of the annual Long Term Incentive Program starting next year.
Teresa Burney is a senior editor with Builder and Big Builder magazines.