PulteGroup: year of living dangerously

A contractor installs roofing for a home under construction at the Toll Brothers Inc. Enclave at Rye Brook housing development in Rye Brook, New York, U.S., on Friday, Dec. 4, 2015. Toll Brothers, the largest U.S. luxury-home builder, is expected to release earnings on December 8. Photographer: Michael Nagle/Bloomberg©Bloomberg

For an 83-year old, 12 months is a long time to wait. That is the length of time at the heart of one of the oddest corporate brawls in years.

In 1950, William Pulte started what would become PulteGroup, a leading US homebuilder with a market capitalisation of $6bn. Mr Pulte handpicked incumbent chief executive Richard Dugas 13 years ago, when Mr Dugas was a lad of 38. After a fight that has escalated publicly in the last few weeks Mr Pulte, now an octogenarian, demands Mr Dugas’ immediate departure. Mr Dugas and the Pulte board instead want the CEO to leave in a year’s time, a window that Mr Pulte still finds unacceptable. In a letter to the board, Mr Pulte wrote “in my 66 years of involvement at Pulte, I have never experienced a CEO like this”. This was not intended as a compliment.

The company is not the most obvious candidate for a palace coup. While its shares are down 3 per cent in two years and trade just above book value, a discount to peers, they have done fine over a longer horizon — if one looks past the boom before and the bust after 2007.

Pulte merged with a rival Centex in 2009, which helped diversify it from a focus on housing development for older Americans and towards first-time buyers.

Mr Pulte owns about 9 per cent of the company and last year successfully had an associate appointed to the board. The company alleges that Mr Pulte, his grandson and the associate ambushed Mr Dugas at a March meeting, and poured forth a list of their grievances. These concerned operational miscues as well the company’s shift in headquarters from Detroit to Atlanta.

The board has fought back, announcing earlier in April that it had renominated all incumbent directors to the board, save Mr Pulte’s ally. Mr Pulte missed the window to nominate a rival slate. He has a year in which to fume, and wait not just for another CEO but a board more receptive to his feedback.

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