Billionaire land baron Donald L. Bren has quietly bought all outstanding shares in the Irvine Co., increasing his stake to 100% from 92% in a deal worth at least $80 million.
Some outside investors who had bought stock in Orange County's largest landowner at $400,000 a share recently received offers from Bren, the Irvine Co. chairman, to purchase the stock at $425,000 per share.
"It worked out very well for us," said Jesse Bean, treasurer for Catholic Healthcare West of San Francisco, the nation's second-largest Catholic-owned hospital chain. "Each share was bought by Bren at a premium. For a six-week hold we made a substantial return."
The Irvine Co. released a statement late Thursday confirming that it had "redeemed all of the outstanding stock held by the company's minority shareholders . . . leaving Donald Bren as the company's sole shareholder."
Bean said investors were told Bren, who has owned a majority stake in the privately held company since 1983, wanted to restructure the firm so he was the sole owner.
That would give Irvine Co. "Subchapter S" status, which means it is taxed as a partnership instead of a regular corporation. Company income can be distributed directly to shareholders and a firm avoids double taxation.
"We are very pleased with this deal," said Mike Danzi, managing director of Danzi Capital Group in Newport Beach, which was selling company stock. "The confidence in Orange County is returning and the bankruptcy is over. Interest in the Irvine Co. shares were really picking up."
Other sources speculated that Bren and Irvine Co. executives were increasingly unnerved by reports in recent years of outsiders buying company stock and it becoming more diluted.
Major League baseball players and Native American tribes reportedly showed interest in buying shares, but investment bankers could neither confirm nor deny that interest, citing confidentiality agreements.
Bren purchased company shares held by all outside investors, including 188 shares originally held by former company director Howard P. Marguleas.
Marguleas had sold a small percentage of his stock to other investors, such as Catholic Healthcare. Bren paid about $80 million for the shares still owned by Marguleas and the ones he had already sold.
It was unknown how much Bren paid for the remaining shares owned by various individuals.
Marguleas was traveling and could not be reached for comment.
Plagued by financial woes at his agricultural empire, Marguleas began marketing his 5% interest in Orange County's largest landowner in a confidential prospectus to investors two years ago.
Marguleas is one of the original team that purchased the Irvine Co. with Bren in 1977 for $337 million and has remained a member of the firm's 12-member board of directors. He became a minority shareholder in 1983 when Bren purchased a controlling stake.
The privately held company and Bren himself are known for keeping finances under wraps. But with Bren's offer of $425,000 a share, the Irvine Co. would be worth more than $1.5 billion.
Marguleas' 1994 stock prospectus reveal that the Irvine Co.'s assets were worth about $4.1 billion and that it had an estimated $1.8 billion of debt, making shares worth more than $600,000 each. There are 3,719 Irvine Co. shares outstanding.
Even the purchase of one share gives investors the right to attend board meetings with Bren, who controls the Irvine Co., owner and developer of the Irvine Ranch.
Claremont McKenna College, Catholic Healthcare West of San Francisco, another health-care fund and several wealthy individuals including at least one from Orange County that wished to remain anonymous, all bought shares from Marguleas at $400,000 per share.
"There's no hard feelings whatsoever," said Joseph Cardoza, chief investment officer at Claremont College, who manages $325 million of investments there. "We're very satisfied with our investment."
Cardoza said the college bought the shares as a long-term investment but decided to take Bren's offer.
Other investors said their understanding was if they did not sell to Bren, he could make them sell under laws that allow those that own a 90% interest in a company to force minority shareholders to sell as long as they pay "fair market value."
(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)
Gaining Sole Ownership
Irvine Co. Chairman Donald L. Bren has upped his ownership stake by purchasing all the company's outstanding shares. History of the privately held firm's ownership:
1864: James Irvine and two partners purchase 108,000 acres in what would become Orange County for $25,000.
1870: Irvine buys out his partners for $150,000.
1894: Irvine Co. incorporates.
1937: Philanthropic James Irvine Foundation forms. Half of Irvine Co.'s private stock is put under its control to protect family members from inheritance taxes that could lead to the sale of the ranch.
1969: Joan Irvine Smith, family's chief voice on the board of directors, successfully lobbies Congress for a change in federal tax law to require foundation to relinquish its half ownership of the company.
1977: Smith forms alliance with Bren, Howard Marguleas and others to outbid Mobil Oil, offering $337 million for foundation's shares. Bren is largest stockholder, with more than one-third of shares. Ranch has shrunk to 77,000 acres.
1983: Bren buys out partners, except for Marguleas, for $337 million, gains 92% ownership. Marguleas retains 5.05%; few remaining shares owned by unnamed individuals.
1995: Marguleas decides to sell his 188 shares, valued at $615,000 per share, for $500,000 each to help his financially troubled Sun Produce International Co., a Bakersfield produce firm.
January: Claremont McKenna College purchases 12.5 shares for $5 million or $400,000 per share.
March: Catholic Healthcare West, a San Francisco-based hospital chain, purchases 12 Marguleas shares for $4.8 million, or $400,000 per share.
July: Bren purchases outstanding shares for $425,000 each.
Source: Times reports; Researched by JANICE L. JONES / Los Angeles Times