Lieutenant Island Views : Commentary About Finance, Politics and Baseball

Centex-Pulte Update | May 5, 2009


Centex just announced a $352 million impairment charge for the quarter ended March 31, 2009. This reduces Centex’s book value from $1.32 billion to $918million. Based on an equity value at offer of $1.305 billion, the purchase multiple of book value rose from 1.0x to 1.4x. This represents a very full price in the current market. That said, as long as the reduction in net worth does not adversely impact Pulte’s debt covenants, and it should not because the merger dramatically reduces the Centex/Pulte banks’ combined exposure, it helps to improve future Pulte margins by reducing land costs. Regardless of the charge offs, it is not likely that another homebuilding transaction will have a similar multiple any time soon.

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Mr Thaler is currently the Managing Partner of Lieutenant Island Partners, an organization providing corporate finance advice and general consulting to corporations and not-for-profit organizations. Mr Thaler retired as Vice Chairman of Deutsche Bank Securities in early 2008. His background includes experience as an investment banker, senior manager, business builder, college professor, not for profit board chair and trustee. In his thirty plus years as an investment banker for Deutsche Bank and Lehman Brothers, he has been involved in numerous significant debt and equity financings, mergers & acquisitions, leverage buyouts, restructurings and cross border transactions. Of particular note, Mr Thaler has been one of the most active participants and strategic advisors to the homebuilding industry. In a period of significant turmoil and losses, he was one of the few active bankers to the industry who did not have either a loss or credit write down. He is currently advising several public builders on strategic matters and is an adjunct professor of finance at Morehouse College in Atlanta, Georgia. Though he lives in New York, he is a life long Red Sox fan! www.LieutenantIslandPartners.com

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