The New Urge To Merge, Pt 2

As further proof of what I wrote about yesterday in the NEW URGE TO MERGE, today Pulte Homes and Centex agreed to merge.

Of the $189.3 billion in first quarter deals, corporate buyers dominated and the private equity world was responsible for just $4.3 billion, according to S&P/Capital IQ. Private equity is hampered by prior deals that they cannot unwind and a drought in deal financing.

After a sharp drop in deal activity as the economy choked in the fourth quarter, there's now a slight pickup in the urge to merge among companies looking to grow their businesses strategically. They are driven in part by relatively cheap stock prices and slow growth in their own businesses.

Some of these corporate combinations are marriages of convenience and are in businesses that have been particularly stressed by the economy.

Few industries have been harder hit than the battered homebuilders.

Today, Pulte Homes and Centex agreed to merge to create the largest U.S. homebuilder in a $1.3 billion stock deal. The transaction also includes $1.8 billion in debt. The deal is also likely to spur mergers among others in the industry.

Questions? Comments?