Watching the homebuilders stubbornly try to go it alone over the last few years has been highly frustrating, like an adult chaperon at the 6th grade dance watching the boys stand on one side of the gym and the girls on the other. When you have a group of companies facing this type of nosedive in their industry, you want capacity taken out. Taking out capacity helps pricing and prevents over-supply, and if there is one sector badly in need of help with poor pricing and over-supply, its housing.
One way for this to happen is bankruptcy, but no one in this country goes bankrupt anymore, apparently, except poor Circuit City. The other ways to take out unwanted capacity are mergers and acquisitions.
From the New York Times:
In a transaction that would create the nation’s largest homebuilder, Pulte Homes and Centex said Wednesday that they would merge in a $1.3 billion stock-for-stock deal.
All kidding aside, what were these guys waiting for?
The merger, said the chief executive of Pulte, Richard J. Dugas Jr., “puts us in an excellent position to navigate through the current housing downturn.”
Toll Brothers, where are you guys? DR Horton, are you listening? Lennar? Someone buy this Hovnanian disaster out or put ’em under. Its at $1.50! And they’re still building for Crom‘s sake! IN FLORIDA!
Let’s rationalize this industry and put an end to the over-building. C’mon boys, cozy up and consummate, we won’t watch.
Full Story: Pulte and Centex Merge (NYT)
Full Disclusure: I have no positions whatsoever in any of the companies mentioned.