Lyon Gets OK on Bid for Control of Presley Cos.
The Presley Cos. said Tuesday that its board of directors has given preliminary approval to a sweetened offer from builder William Lyon to buy controlling interest for slightly more than $11 million.
The agreement calls for Presley to then purchase the assets of Lyon’s company, William Lyon Homes Inc., for about $48 million.
Lyon, a longtime Southern California developer, would wind up in control of both Newport Beach-based home-building companies and several pieces of prime California real estate.
His new offer for the Presley stock is worth 65 1/2 cents per share, up from a previous bid of 62 cents.
The complex deal is part of an ongoing consolidation trend in the Southern California home-building industry.
It could allow the two firms to better compete in a regional residential development industry that has increasingly become dominated by large, publicly traded builders such as Kaufman & Broad Home Corp. in Los Angeles and Centex Corp. of Dallas.
“It’s becoming harder and harder to stay in the marketplace without the deeper financial resources that larger companies have,” said Gary Wescombe, a partner at E&Y; Kenneth Leventhal Real Estate Group, an Orange County consulting firm to the home-building industry.
He added: “By having larger entities with greater equity and better access to capital, they’re able to more effectively compete.”
Clear-cut advantages exist for both companies, analysts said. Presley would acquire land and homes in various stages of completion in at least 15 sites throughout California, most of them in the highest-priced housing markets in the country.
With home prices at near-record highs, analysts said, Presley’s revenue could be improved at a time when the company has few homes completed and ready to sell.
Lyon, meanwhile, as chairman, would be head of a publicly held company that has the ability to attract capital at lower rates, analysts said.
“Bill Lyon would like to be a bigger player in an expanding market,” said Russ Valone, president of Market Profile/Residential Trends, a San Diego-based firm that tracks new-home development in Southern California. “This allows him to step up and play with the big boys,” he said.
In new-home sales last year, Lyon Homes ranked 21st in Orange County with 117 sales. Presley placed 31st with 70 sales. Combined, the firms would rank 14th with 187 sales, according to the Meyers Group, an Irvine-based company that tracks new-home sales.
Struggling to recover from a prolonged slump that has lasted for much of the decade, Presley said in March it incurred about $1.3 million in costs last year associated with its effort to find an investment partner to aid its recovery.
The company posted a $9.8-million profit for 1998, versus a loss of $89.9 million in 1997. Revenue grew to $368.3 million, up 12% from $329.9 million.
Lyon, who owns Lyon Homes, is Presley’s largest shareholder, with a 16.4% stake, according to proxy statements filed with federal regulators.
Under terms of the deal, Lyon would raise his ownership stake in Presley to between 49% and 49.9%, securing his control of that company. Then, Presley would acquire the assets of his Lyon Homes for $48 million.
The new bid is Lyon’s latest effort to consolidate his home-building operations. The companies have been negotiating since last summer, when Lyon offered to buy a bigger piece of the company for $18 million cash, or 40 cents a share. That was less than half of what Presley’s stock was trading for at the time, and the offer was rejected by Presley’s board.
Lyon has since proposed acquiring smaller interests in Presley at higher per-share prices, culminating in the present 65 1/2-cents-per-share offer. The companies can continue negotiating a final agreement until mid-July, Presley said.
