Founder Bids for Home Builder
The general hasn’t given up the fight.
On Friday, for the second time in a year, the founder and chief executive of William Lyon Homes made an unsolicited offer to take the Newport Beach-based real estate developer private.
William Lyon, who served as a pilot in the Korean War and later commanded the Air Force Reserve, offered to buy the 51% of the company he doesn’t already own for $93 a share.
The news sent the shares soaring $23.30, or 31%, to $99.
The offer expires April 13, Lyon said in a statement. He didn’t return calls seeking comment.
Given that the stock has already topped Lyon’s offer, “I’m not sure $93 will be the final number,” said analyst Alex Barron of JMP Securities in San Francisco. He suggested that Lyon might raise his bid slightly.
Lyon offered to buy the company in April for $82 a share, a 12% premium at the time. He withdrew his bid two months later after it was rejected by a committee of independent directors as inadequate.
Four board members also resigned last summer because of disagreements over his buyout offer.
Lyon’s latest bid represents a 23% premium above Thursday’s closing price of $75.70, “a sign that he wants to put this to rest once and for all,” said Bob Poole, chief investment officer of Bricoleur Capital Management in San Diego, which owned shares in the home builder until last year.
Lyon, 83, has long desired to gain total control of the company he started with his brother Leon in 1954 to build homes for military veterans.
He became the head of a public company in 1999, when his firm merged with a struggling, publicly held builder, Presley Cos., in which he had a large equity stake.
The combined company has grown rapidly. Last year William Lyon Homes built 3,196 homes in California, Arizona and Nevada, putting it among the nation’s 20 biggest builders. Its homes range in price from $200,000 to $2 million.
Barron said he wasn’t surprised by Lyon’s renewed takeover bid. Lyon already controls 50.4% of the company’s voting stock.
Barron has a “market-outperform” rating on William Lyon Homes’ stock, with a price target of $100, but he recently lowered his 2006 per-share earnings estimate for the builder to $14 from $20, citing a softening housing market.
Lyon’s buyout offer comes at a time when his firm and others are forecasting a downturn in business as mortgage rates rise and home prices soften, crimping orders for new homes.
Investors are also concerned that Lyon’s company builds homes in three of the nation’s most overheated real estate markets, and each of them has started to cool.
Last week William Lyon Homes’ shares hit a 52-week low of $70.75, down from a high of $165.85 in September.
This month the company did report an 11% jump in net income last year, to $190.6 million, as revenue rose 2% to $1.9 billion.
But the builder also warned that so far in 2006 it was experiencing a decline in new-home orders, a rise in cancellations and increasing pricing pressures from competitors that are offering discounts to lure buyers.
