Lyon Homes Shares Surge on Buyout Bid

William Lyon Homes stock soared 14% on Wednesday, well above the $82-a-share buyout price offered by the company’s top executive, suggesting that investors expect a sweetened bid.

The Newport Beach-based company’s shares rose $10.73 to $85.98 on the New York Stock Exchange. Late Tuesday, Chairman and Chief Executive William Lyon proposed acquiring the 28% of the home builder not already controlled by him or his family for about $200 million.

“I think the $82 price is significantly below what the stock is worth,” said Bob Poole, chairman and chief investment officer of Bricoleur Capital Management in San Diego, which owns 85,000 Lyon shares. He said the offer price was only four times the company’s expected earnings per share this year and next.

“I think the fair price -- from a seller’s perspective -- is up around $120 a share,” Poole said.

At least one shareholder agreed that Lyon’s offer price was lacking and took steps to block the takeover plan. In a lawsuit filed in Delaware Chancery Court, Eastside Investors claimed that the cash offer was “unfair and inadequate” and an effort by Lyon to “aggrandize himself at the expense of the company’s stockholders.”

Calls to Lyon and other company officers Wednesday weren’t returned.

It wasn’t clear whether Lyon would raise his offer. It was unlikely, however, that an outside bidder would step up because Lyon said in a statement Tuesday that he wouldn’t sell his interest in the firm or “entertain any proposals in that regard.”

“I think he is pretty determined to keep the company independent,” Poole said.

Lyon, 82, the company’s founder, owns 48% of the stock while his son controls an additional 24% through a family trust.

William Lyon Homes sold 3,400 homes last year, primarily in California but also in Nevada and Arizona. It ranks among the nation’s top 20 home builders.

In January, Lyon spent about $45 million to buy more than 600,000 of the company’s shares.

In his statement Tuesday, Lyon offered few details about his buyout plan but said he would use some of the firm’s cash, along with other financing, to complete the deal. As of Dec. 31, the company had $96 million in cash or cash equivalents.

The likelihood that the company would take on more debt to go private raised concerns among some of its bondholders, said Matt Wilcox, a bond analyst at KDP Investment Advisors in Montpelier, Vt. They have been keeping a watchful eye on the firm, as well as the California housing market, which many believe is headed for a slowdown, he said. About two-thirds of Lyon’s sales are in the state.

The plan to take the company private “is not a positive” in bondholders’ view, Wilcox said.