From this morning’s Wall Street Journal:
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.
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.
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.
New home sales are down 76% from their peak in July 2005. Consolidation in the industry was inevitable. Look for more mergers in the future.
Mish's Global Economic Analysis
Northern Virginia Housing Bubble Fallout
Ohio Fraudclosure
Bubble Meter
UK House Bubble
Breaking News Relevant Articles© Copyright 2012 Housing Doom | Copyright© 2011, AuthentiCraft, Inc.
I never understood why businesses do this. Struggling companies always seem to try to get out of trouble by buying other struggling companies. Business not going well? Blow your cash reserves buying someone else who has the same problems!
So now we’re going to have a giant homebuilder with the combined problems of both parties.. how is that fixing anything? I give it a year before they start closing down/laying off and end up at the same size they’d be if they hadn’t merged and just waited for the other guy to go bankrupt.
I used to have a client that specialized in corporate culture consulting. They were often engaged by companies that merged with other companies, only to find that the employees divided into warring camps, refused to work with each other, and worse. Sort of like what happened with Daimler and Chrysler.
Can’t help thinking that this client is doing a brisk business. Or soon will be.
And, like Igor, I think that merger mania is often absurd.
But when you buy another company you get to put a new figure for ‘Goodwill’ on your balance sheet.