Pulte-Centex Merger Nets Synergy Savings

Pulte Homes’ merger with Centex in August makes it difficult to compare how the company performed in its third quarter this year versus last. There were tons of merger costs, and adding the two companies’ results together muddles the numbers. “Peel back the onion, however, and you will see we are making progress," CEO Richard Dugas told investors Wednesday morning. While the company booked a net loss of $361 million, or $1.15 a share, much of that was consumed with land impairments ($164 million), merger-related costs ($87 million), and a $47 million charge related to debt payoffs. Dugas emphasized that the merger is creating bigger cost savings faster than expected. The company had expected the merger would create synergy savings of $350 million a year, but now estimates have climbed to $440 million, plus another $150 to $200 million in purchasing savings. The rationale (for the merger) has grown more compelling in the months since” the deal happened, according to Dugas. The company has sorted out Centex’s assets and liabilities and determined that, in the end, Pulte paid $1.5 billion for the company. In addition to Centex’s brand names, which include more entry-level products, and access to markets such as Texas and the Carolinas where Pulte had less of a presence, Pulte also acquired Centex’s land assets in the deal. Those tallied 61,988 lots at the end of September. The combined Pulte/Centex now has 176,727 lots, of which 153,618 are owned.

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