According to the Associated Press, Pulte Homes Inc. is buying Centex Corp. for $1.3 billion in stock... thus creating the nation's biggest homebuilder and the nation's next recipient of bailout money! This deal gives Pulte a large amount of land in Texas and the Carolinas, both places where I would definitely stay away from when it comes to real estate. Home prices have not yet bottomed in these areas and more bad news is yet to come. We still haven't seen commercial real estate take a freefall... give it another 6 months.
One positive is that Pulte is keeping their name and also the headquarters in Bloomfield Hills, Michigan... This way they're close to the automakers and easily learn how fail miserably. This will inevitably lead to more layoffs in an already decimated Michigan job market.
"We believe the combined companies will allow us to return to profitability quicker than a standalone. Secondly, the cash position allows us to pay down debt while at the same time provide ample liquidity for the future," said Richard Dugas Jr., Pulte's president and chief executive... Good luck buddy. Don't take a private jet to the congress hearings.
As part of the deal, Centex shareholders will receive 0.975 shares of Pulte common stock for each share of Centex that they own. These can be redeemed at McDonalds for a Happy Meal Toy.
Pulte and Centex are trying to capitalize on what the executives see as the beginning of a recovery in the housing market, but this is just the beginning of a short-lived summer rally. The unemployment and commercial real estate dominos have yet to fall.
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