Icahn boosts pressure on WCI

Icahn boosts pressure on WCI

TAKEOVER BATTLE by Jean Gruss | Editor/Lee-Collier

Icahn says he'll offer $22 a share for WCI Communities. Meanwhile, three major hedge-fund investors disclose new stakes in the Southwest Florida homebuilder.

Billionaire investor Carl Icahn increased pressure on WCI Communities March 13 by announcing he intends to buy the shares he doesn't already own for $22 a share, or about $787 million.

Based on the number of shares outstanding, Icahn's offer puts a total value of $921 million on the Bonita Springs-based homebuilder. WCI, which is considered the bellwether company for homebuilding in Southwest Florida, recently announced a fourth-quarter loss of $65 million, which included $118 million in write-offs.

Although Icahn has made no formal offer yet, his statement sent WCI's stock soaring to $21.80, up nearly 15% from the March 12 close of $18.97. WCI issued a statement saying they'll review Icahn's proposal but urged shareholders not to take any action.

"We believe the board and CEO of WCI have not enabled the company to maximize the potential of its unique set of assets," Icahn says in the statement. Icahn, whose fortune Forbes magazine recently pegged at $13 billion, asked the board to remove its recently adopted poison pill provision, which dilutes the ownership of any shareholder who acquires more than 15% of the company.

WCI recently hired Goldman Sachs to advise it on a possible sale or restructuring. "While clearly now is not the right time to sell, in my opinion [WCI Chief Executive Officer Jerry] Starkey and the current board are not qualified to navigate WCI through the difficult industry conditions that lie ahead," Icahn says.

Icahn's statement barely hinted at his strategy. "We question whether Mr. Starkey and the current board have the ability or the expertise to take advantage of the complex strategic opportunities that I believe may present themselves. Additionally, mergers, including the possible sale of the company in the future at the right time and price, may be overlooked by the current board."

Icahn is waging a proxy battle for WCI that seeks to replace the current board with his own slate of directors, including himself and Sarasota-based Palmer Ranch owner Hugh Culverhouse Jr. If elected, Icahn says his directors would remove the poison-pill provision.

The current board of WCI includes powerful Florida business executives, including Charles Cobb Jr. of Miami, the former chairman of Arvida Corp. and Disney Development Co., who is expected to become WCI's next chairman at the May 17 annual shareholders' meeting. He will succeed Don Ackerman, who says he'll step down from the chairman's post but remain on the board.

Others include Stewart Turley, former chairman and CEO of Clearwater-based Eckerd Corp., and F. Philip Handy, a Winter Park investment banker who served as Gov. Jeb Bush's chairman of the Florida Board of Education.

Meanwhile, three major investors disclosed new stakes in WCI.

Sandell Asset Management, a New York-based hedge fund, says it acquired 9.8% of the company. In a letter to WCI's board, fund manager Thomas Sandell says he supports Icahn's efforts, including electing an alternate board of directors. "If that process does not yield a higher value, we encourage the board to work with Mr. Icahn toward a negotiated deal rather than attempt to hide behind the recently adopted poison pill," Sandell wrote.

Chicago-based hedge-fund manager Kenneth Griffin and his firm, Citadel L.P., stated in securities filings they have acquired 5.5% of WCI's shares. The Financial Times recently speculated Griffin is "the most feared man on Wall Street" because of his ability to raise funds independently of banks and keep investors' money locked up for long periods of time. Griffin manages $13 billion.

Another investor, New York-based hedge fund D.E. Shaw & Co., acquired 5% of WCI. Shaw manages $23 billion and is known for its quantitative approach to investing, relying on computer programs to search for undervalued stocks and excluding human judgment in the process.

Icahn is WCI's second-largest shareholder with a 14.6% stake, behind Los Angeles-based money management firm Hotchkis & Wiley that owns 16.1% of WCI. A spokesman for Hotchkis & Wiley says the company never comments on the stocks it holds.

Also in the mix are New York hedge-fund tycoon Steve Cohen and SAC Capital Advisors, who recently increased his stake to 7.8% of WCI's shares outstanding, and money management firm Neuberger Berman and its managing director Marvin Schwartz who have a combined 12% stake.

Together, the investors listed above control 71% of the WCI's stock.

REVIEW SUMMARY

Company. WCI Communities.

Industry. Homebuilding.

Key. A billionaire investor angles to acquire Southwest Florida's largest homebuilder.