- Homebuilder was publicly criticized by namesake founder
- Activist in standstill pact as company plans to cut spending
PulteGroup Inc., the homebuilder that has faced criticism from its namesake biggest investor, added three independent directors and committed to reduce spending in a settlement reached with sometimes-activist hedge fund Elliott Management Corp.
Joining the board immediately are real estate investor and former executive John R. Peshkin, financial-services executive Scott F. Powers, and executive Joshua Gotbaum, PulteGroup said in a statement Thursday. Peshkin and Gotbaum will join the existing chief executive officer search committee.
In a separate filing, PulteGroup said it was “taking actions to lower our selling, general and administrative spend” to a targeted rate of 9 percent or less of 2017 home-sale revenues, from an expected 10 percent in 2016. The company also boosted its share buyback authorization to $1.5 billion and said it intended to spend that by end-2017.
The settlement included a standstill and non-disparagement pact with Elliott, limiting the investor’s ownership of the company and ability to publicly criticize it.
Elliott’s stake was made public last month, and its negotiations happened behind the scenes, while PulteGroup’s co-founder and largest shareholder, Bill Pulte, publicly criticized management and demanded changes.
“While I wish we could have avoided an unnecessary public dispute, I am pleased that my direct involvement was the catalyst for significant positive change,” the founder said in a separate statement Thursday.
The changes he cited include “an accelerated CEO transition, a refreshed board of directors with new-home building experience and operational expertise, better utilization of the balance sheet, a less aggressive land purchase strategy, and a commitment to reverse” spending trends.
Earlier this year, Bill Pulte called on Chief Executive Officer Richard Dugas to resign immediately, saying Dugas was responsible for the departures of talented executives, overly aggressive land purchases before the housing crash and stock underperformance relative to some peers. Dugas has said he will step down next year.