PulteGroup Inc. PHM entered into an agreement to acquire the homebuilding assets of John Wieland Homes and Neighborhoods (Wieland), an Atlanta-based move-up and luxury home builder.
The acquisition is anticipated to cost about $430–$450 million and will close by first-quarter 2016. PulteGroup expects to acquire about 7,400 controlled lots and 280 homes in backlog from the transaction.
The acquisition will improve PulteGroup’s position in the Southeastern housing market, where housing demand is strong. Moreover, the addition of lots and homes in backlog will improve the company’s supply in a period when many homebuilding companies are facing supply constraints owing to a shortage of buildable lots and limited availability of labor.
Adding lucrative land positions has been PulteGroup’s strategy to support future growth. The company follows a disciplined approach of acquiring better-located land positions that have the ability to generate higher returns. The company spent $1.3 billion and $1.8 billion on land and related development in 2013 and 2014, representing around 40% and 30% year-over-year increase, respectively. Moreover, management expects to spend approximately $2.3 billion for land investment in 2015, up roughly 30% from the 2014 levels. Year to date, the company’s land expenditure has been $1.5 billion.
Moreover, the company is shifting focus toward the steeply priced move-up homes and active adult homes that improve the overall average selling price (ASP).
PulteGroup currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Investors interested in the construction sector can consider Lennar Corporation LEN, Sekisui House Ltd. SKHSY and Masco Corporation MAS. All the three companies have a Zacks Rank #2 (Buy).
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