NEW YORK (Dow Jones)-- Home builders soared at the open Wednesday, following the surprise early-morning announcement that Pulte Homes Inc. (PHM) and Centex Corp. (CTX) will form the nation's largest home builder working to stay afloat during the worst downturn in decades.
Shares of Centex jumped nearly 30%, while Standard Pacific Corp. (SPF) spiked more than 12%. Hovnanian Enterprises (HOV) and Lennar Corp. (LEN) were also up more than 10%.
Pulte, however, recently traded down nearly 9%.
In a decision the executives labeled a first-mover advantage and a game changer, Michigan-based Pulte will acquire Centex Corp. for about $1.3 billion in stock. The companies said Wednesday that the combined company would have a market capitalization of $4.1 billion, beating out D.R. Horton Inc. (DHI), the largest home builder by volume, with a market capitalization of $3.4 billion. Its shares gained nearly 3%.
Under the deal, which also includes $1.8 billion of debt, Centex shareholders will receive 0.975 Pulte common shares for each share of Centex they own. Based on Pulte's Tuesday closing price of $10.77, the deal is valued at $10.50 per Centex share, a 38% premium over Centex's Tuesday close of $7.62. Pulte shareholders will own about 68% of the combined company, while Centex's will own about 32%.
Pulte Chief Executive Richard Dugas Jr. said the deal would combine Centex's strength in the entry-level and move-up categories and Pulte's strength in the move-up and active adult community segments.
Dugas will remain chairman, president and CEO of Pulte. Centex CEO Timothy Eller will join Pulte's board as vice chairman and will serve as a consultant to the company for two years after the deal closes. The companies expect the deal to close in the third quarter.
Source:online.wsj.com
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