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Founder's Offer for Builder Rejected

June 21, 2005|Annette Haddad and Tom Petruno | Times Staff Writers

A special board committee of William Lyon Homes Inc. on Monday rejected as "inadequate" an $82-a-share buyout offer for the company from its controlling stockholder.

Wall Street had already decided that the bid was too low, as shares of the Newport Beach-based home builder have been trading more than 10% above the takeover offer price.

What's more, stocks of most builders have surged since early May as mortgage rates have fallen. Shares of rivals, including KB Home and Ryland Group Inc., hit record highs Friday.

William Lyon Homes' stock soared above the $82-a-share bid price the day after the offer was made April 26 by founder, Chairman and Chief Executive William Lyon. Since then, shares have traded mostly between $88 and $92 -- a sign that investors and traders believe that the offer will eventually be raised.

On Monday, the stock closed at $91, down $1.05, before the committee issued its brief statement. A spokesman for the committee declined to comment further. Calls to the company and to William Lyon weren't returned.

Shareholder Stephen Brown of Florida said Monday that he believed the shares were worth at least $120 each, eight times expected full-year 2005 earnings per share. That would still be below the price-to-earnings ratios of many of the top builders, including Lennar Corp. and DR Horton Inc., which both trade at nine times estimated earnings, and Toll Bros. Inc., which trades at 12 times.

"I thought the initial offer was short, relative to the valuation," said Brown, who owns 2,100 shares.

The four-member special committee is headed by William McFarland, the former CEO of Irvine Apartment Communities Inc., now part of Irvine Co.

He was CEO of Irvine Apartment in 1998 when real estate magnate Donald Bren, who owned 17% of the firm's shares, offered to buy the rest for $32.50 a share. After some investors criticized the offer as too low, Bren raised it to $34 a share in February 1999, and the company's board accepted the higher bid.

William Lyon Homes primarily builds in California, Arizona and Nevada. In the first quarter, the company reported net profit of $20.5 million on revenue of $246.7 million.

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