PulteGroup CEO Dugas to Resign Under Pressure From Founderby
Shares fall 6.6% on news of retirement, effective May 2017
Bill Pulte, grandson and director demanded immediate change
PulteGroup Inc.’s board is in a dispute with its founder and largest shareholder over the homebuilder’s direction, leading to the planned departure of longtime chief executive officer Richard Dugas.
Bill Pulte, his grandson and Jim Grosfeld, a board member and former executive, “recently demanded an immediate CEO change and a different direction for the company,” according to a statement from the company on Monday. “In an effort to avoid a contested public battle that would not be in the interests of shareholders, Mr. Dugas offered to accelerate and make public the board’s succession plan.”
Dugas, 50, has been with the company since 1994 and has served as CEO since 2003, and chairman since 2009. His retirement will be effective May 2017, PulteGroup said.
Bill Pulte -- who founded the company in 1950, at age 18, with five high school friends -- followed the statement with a letter to the board pressing for more immediate change, citing disappointment in PulteGroup’s share performance, staff departures and the company’s relocation to Atlanta from the Detroit suburb of Bloomfield Hills in 2014.
Pulte’s move is surprising because Dugas’s strategy to improve profitability at PulteGroup, the No. 3 U.S. homebuilder by revenue, has been working, said Drew Reading, a homebuilding analyst for Bloomberg Intelligence. Net income for the fourth quarter was $228 million, or 64 cents a share, up from $217 million, or 58 cents, a year earlier. The company’s gross margin on home sales was 23.5 percent, up from 23.1 percent.
“The company has made significant progress over the last several years under Richard Dugas by focusing on running a more efficient and balanced operation,” Reading said in an interview. “How to leverage the company’s much-improved balance sheet may be among the considerations.”
PulteGroup shares fell 6.6 percent, the most since October, to $17.21. They’ve lost 24 percent in the past 12 months, compared with an 11 percent decline in the S&P Supercomposite Homebuilding index.
PulteGroup’s board decided not to nominate Grosfeld for election as a director at its shareholder meeting in May, "as a result of differing points of view between Mr. Grosfeld and the other independent directors over succession planning and other business strategy matters," according to a proxy statement filed Monday.
Grosfeld, the chairman and CEO of Pulte Homes from 1974 to 1990, joined the board in December. His appointment was at the behest of Bill Pulte, the homebuilder said Monday.
Pulte said in his letter that the decision not to renominate Grosfeld “reflects an attempt to stifle any differing views on management and business strategy matters.”
The board named James Postl, Cheryl Grise and Patrick O’Leary to its search committee, which is considering internal and external candidates to take over for Dugas, according to Monday’s statement.