Struggling Florida Home Builder May Be Sold
A billionaire plans to launch a $22-a-share offer for a struggling Florida home builder, Bonita Springs-based WCI Communities Inc.
Carl Icahn, a major investor in WCI who holds nearly a 15 percent stake, said Tuesday that he and his affiliates would buy “any and all” stock at the offer price. His offering price was 16 percent more than Monday’s closing price.
It’s a deal valued at more than $950 million.
Icahn, known for pressuring management to improve financial performance in the companies he has invested in, wants to run his own slate of officers for the home builder’s board. His list of candidates includes himself. He believes his offer was “in the best interest of all shareholders.”
“We believe that the board and the CEO of WCI have not enabled the company to maximize the potential of its unique set of assets. … We expect our slate … to ensure these unique assets are properly marshaled through the current residential housing industry downturn,” he said.
Officials representing the Florida home builder weren’t commenting on his offer Tuesday. But it had other shareholders — big and small, and all concerned about the future of the Southwest Florida housing market — talking.
“I would not be the slightest bit interested in his takeover bid,” said Phil Wood, a shareholder, as well as the president of Naples-based John R. Wood Realtors Inc. “I’d rather leave everything with the present board and let them keep running the company.”
Wood purchased shares in the home builder about two months ago, basing his investment on expectations for a turnaround in the Florida housing market. He describes himself as a “very small” shareholder.
The closing of Icahn’s offer comes with conditions, including elimination of a so-called “poison pill,” which the company recently adopted in an attempt to ward off a hostile takeover.
“We do not expect management to waive the poison pill,” Bank of America analyst Daniel Oppenheim wrote in a note to investors. “We think that this will increase the pressure on the board to develop a strategic plan prior to the annual meeting, which should occur before mid-June.”
Last month, WCI, a real estate developer of prime waterfront and country club communities, reported a rare quarterly loss, blaming sluggishness in the Florida market.
As Florida mortgage demand declined statewide, the company lost as much as $64.6 million, or $1.52 a share, in the fourth quarter. That in comparison to profits of $54.6 million, or $1.20 a share, a year ago.
WCI’s losses in the last quarter were greater than analysts expected, and with many experts now believing Florida mortgage loan activity may remain slow in 2007 and beyond, they’re wondering what comes next.
And a $950 million offer is nothing to sneeze at.
“We think this offer reflects the value of WCI’s aged coastal Florida land and the likelihood of a high percentage of closings on tower units under contract,” Oppenheim.
In a tough Florida market, WCI has seen fewer home sales, more contract cancellations and rising defaults. The company builds traditional single-family home and multi-family home developments, as well as condominium towers.
Oppenheim doesn’t expect to see competing bids because of the “challenging conditions in Florida” and the “lack of stability in the business.”
Recently released statistics from the Florida Association of Realtors show home sales remain slow. In January, existing single-family home sales in the state declined 27 percent, while existing condominium sales fell by 30 percent, compared to the same month a year ago.
The good news is that the inventory up for sale is beginning to improve in many markets. But will Florida home mortgage conditions improve enough for the company to turn around sooner, rather than later?
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