Two huge home builders plan to merge their operations, creating the nation's largest residential developer and shifting a large portion of the Charleston market to a company with a tiny local footprint.
Pulte Homes Inc. will combine with Dallas-based Centex Corp., a long- established builder in the three-county region with 21 neighborhoods in nine communities.
Pulte, by contrast, entered the Charleston market just two years ago with its Del Webb at Cane Bay neighborhood, which targets empty nesters who are at least 55 years old.
The merged company will take Pulte's name and home base in Pulte's hometown of Bloomfield Hills, Mich.
Company officials said the deal will help both builders, which have been battered by the housing downturn, get through the recession.
"Combining these two industry leaders with proud legacies into one company puts us in an excellent position to navigate through the current housing downturn, poised to accelerate our return to profitability,"
Pulte President and Chief Executive Officer Richard J. Dugas Jr. said in a statement.
The acquisition gives Pulte access to large tracts of Centex-owned land in Texas and the Carolinas, two of the nation's most resilient real estate markets, and a presence in 29 states and Washington.
Job cuts are expected, but they could be minimal in Charleston because of Pulte's relatively small foothold in the region.
Pulte spokeswoman Caryn Klebba said it's too early to say what the deal means for her company's 20 locally-based employees or for Centex's 62 workers in the region.
Details are expected when the merger is completed in the third quarter, Klebba said.
"At that time, we'll make decisions on operating costs," she said. "The nice thing about a merger is that you streamline operations, so there will be significant savings."
The union is projected to save the companies a combined $350 million annually, mostly because of a reduction in overhead costs, according to a statement.
The merged company will have operations in 59 markets across the country, including Charleston, Myrtle Beach, Beaufort, Hilton Head Island and the York area in South Carolina.
At the peak of the housing boom in 2005, Pulte built 45,630 homes and Centex 37,022. Last year, both companies built fewer than half those numbers, and have slashed construction and prices to stem the red ink.
Pulte lost almost $3.73 billion over the past two years, more than wiping out all of its profits for the prior three years. Centex lost $2.66 billion last year, erasing its earnings for the prior four years.
The worst housing recession since the Great Depression has toppled many homebuilders, and Centex Chairman and Chief Executive Officer Timothy Eller was determined his company wasn't going to be among them. So, two months ago he picked up the phone and called Dugas.
"Richard agreed that this would be a very strong combination, very complimentary. As you can tell, it's moved quite swiftly since that first initial call," said Eller, who will become Pulte's vice chairman and will work as a consultant for two years following the acquisition's completion.
The combined company will have twice the revenue of its next largest rival, D.R. Horton Inc. Pulte and Centex pulled in a total of $11.61 billion in the last twelve months, compared to D.R. Horton's $5.82 billion.
"I never would have thought Centex and Pulte would have gotten together, but of all the sort of potential combinations out there, it's probably the one that makes the most sense," said Robert Stevenson, an analyst with Fox-Pitt Kelton.
While beaten-down shares of other homebuilders like Beazer, Lennar and Hovnanian rallied on speculation they could be easy takeover targets, Stevenson was doubtful.
"If you look at the rest of the players, it's tough to find an overlap in terms of operation and valuation where you can easily get a deal done," he said.