Presley Cos. Slashes Stock Offering Size, Price and Dividend

The Presley Cos. has radically altered terms of its proposed initial public offering by slashing the number of shares to be sold, cutting the anticipated offering price and reducing the size of a dividend to be paid existing shareholders, including Chairman William Lyon, by more than $62 million.

Officials of the 35-year-old home-building firm have declined to comment on the offering because of regulatory restrictions.

But the changes appear to mean that Presley has found potential buyers of real estate stocks in the current depressed economy to be much more cautious than it originally believed.

The changes also reflect an apparent distaste by potential investors for Presley’s initial plans to pay almost 50% of the offering’s proceeds--or about $73 million--to the existing shareholders. Most of that was to go to a key group of shareholders led by Lyon, who personally owns 69% of the company’s stock. Lyon is also founder and chairman of the William Lyon Co., one of the nation’s largest home builders.

Lyon purchased Presley Cos. with a group of its managers for $7.3 million in 1987.

Presley’s original prospectus called for an offering of 10 million shares, to be priced somewhere between $13 and $16 a share, for a total of $130 million to $160 million. Proceeds to the company after expenses were estimated at $138.2 million.

A new prospectus, issued Monday, calls for only 7 million shares to be sold, at $10 per share--to raise a total of $70 million. After expenses, the company expects to receive about $63.4 million, according to the new document.

That represents a 54% cut in anticipated income from the offering.

Other changes to the offering ripped away most of the initially proposed $73-million dividend to existing shareholders. Under the new plan, the dividend would total only $9.2 million.

In yet another major change in the terms of Presley’s offering, the new prospectus earmarks all remaining proceeds--an estimated $54 million--for reduction of the company’s nearly $400 million in bank debt.

The old prospectus called for unspecified use of remaining proceeds to cover ongoing operating expenses, pay off debt and to finance new projects.

As a result of the smaller stock issue, however, Lyon and the key investors would continue to own controlling interest in Presley Cos., with 54% of the outstanding common shares. Lyon alone would own 42.9% of the company.

Under the initial proposal for a larger offering, the existing shareholders would have retained a 46% interest in the company, with the Lyon group maintaining a 40% interest. Lyon’s personal holding would have been reduced to 31.7% of the company’s stock.

Timing of the Presley offering is still uncertain because the final terms have not yet been approved by the Securities and Exchange Commission. A spokesman for Kidder, Peabody & Co., which is managing the offering, said the shares could hit the market later this week.

If the stock sells, it would mark the first initial public offering of a residential building company in the United States since 1987, when J.M. Peters Co., also headquartered in Newport Beach, went public with an offering of 2 million shares priced at $6 per share.

Peters since has fallen on hard times and its stock closed unchanged Monday at $1.88 a share.