PulteGroup is adding three new directors to its board — including two who will help pick its next CEO — under pressure from a New York hedge fund that recently bought a stake in the Atlanta homebuilder.
The company, which has been embroiled in a public battle in recent months with its 83-year-old founder, Bill Pulte, announced the move Thursday. A day earlier, PulteGroup had reached an agreement with the New York-based Elliott Management to expand its board to 13 to accommodate the new directors.
The company also agreed to cut its overhead expenses to 9 percent of its home sales revenue next year, from 10 percent now.
Under the one-year deal, Elliott Management agreed not to mount a proxy fight with the homebuilder or to add to its 4.7 percent stake in the company.
PulteGroup agreed to seat two of the new directors on a board committee that is hunting for a replacement for CEO Richard Dugas, who is retiring in May 2017 as part of an accelerated succession plan.
The two new directors on the search committee include John Peshkin, a former CEO of homebuilder Taylor Woodrow Homes, with 30 years in the industry; and Joshua Gotbaum, former CEO of the U.S. Pension Benefit Guaranty Corp. The third new director is Scott Powers, former CEO of Boston money manager State Street Global Advisors.
The news comes as PulteGroup announced better-than-expected earnings for its second quarter on Thursday. The company said it also plans to cut land purchases and to triple its stock repurchases, to $1.5 billion, by the end of 2017.
PulteGroup said its second-quarter profit was almost $118 million, 14 percent higher than a year earlier.
Some of those moves seem to mirror changes that were being sought by Bill Pulte, who has frequently clashed with the company over its financial performance under Dugas' leadership. He also questioned the Dugas-led decision to move the headquarters to Atlanta from suburban Detroit in 2014.
In a letter to the board Thursday, Pulte said he was “encouraged by the initial shareholder victories,” including changes to the board that added more people with experience in the home-building industry, and less spending on land.
“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,” he said.
Pulte had previously criticized the company for its land purchases, which he called a late and risky investment because land prices have risen too high since the housing market has recovered in recent years.
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