New from the WSJ . With all the troubles in the home builder market, some consolidation was inevitable. Pulte said the deal would result in cost savings of around 350 million dollars a year.
Pulte Homes Inc. (PHM) will acquire Centex Corp. (CTX) in a $1.3 billion stock deal that the companies say would form the largest U.S. home builder, as the sector looks to stay afloat amid the still-worsening housing market.
Home builders have been struggling to navigate the worst downturn in decades, made worse by rising unemployment and the financial crisis, which has weakened the availability of credit for would-be buyers and hurt consumer confidence.
New home sales unexpectedly climbed for the first time in seven months in February, the most recent month with data available, but prices continued to tumble. Sales were still 41% below a year earlier as rising layoffs push people from making big purchases and inventories remain high.
The combined company will be the largest U.S. home builder by market capitalization and volume. Pulte and Centex 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.
Consolidation is no surprise given the massive reduction of new home sales, see chart below:
New Home Sales Annual Sales Rate, Seasonal Adjusted
Chart via Census Department
As the Industry adjusts to a very different market, these changes are very natural.