William Lyon Homes Inc. to buy Presley Companies for 0.13 times revenue

Weekly Corporate Growth Report, Nov 1, 1999

The Deal: In an attempt to regain his position as one of Southern California's largest housing developers, real estate developer William Lyon agreed to acquire a dominant interest in Presley Cos. Under the terms of the deal, Presley would buy the privately held William Lyon Homes Inc. for $48 million and assume several million dollars in debt.

At the same time, Lyon, who is chairman of both of these companies, and his son have offered to purchase 10.6 million shares of Presley stock for 65 cents a share, or $6.9 million. The purchase would increase Lyon's stake in Presley from 22% to 49%. However, the offer price is below Presley's current market price.

Discussion: Presley Cos. designs, builds and markets single-family detached and attached homes in Arizona, California, Nevada and New Mexico. Nearly 71% of the company's revenues come from its California operations. The company primarily targets entry-level and move-up buyers, with prices averaging $192,000.

William Lyon was ranked among the region's largest independent builders ten years ago but was severely hurt during the recession. The combination of his private company, William Lyon Homes Inc. with Presley Cos. would allow Lyon Homes to branch out past its Orange County core into San Diego County and the Inland Empire, where Presley is one of the most prominent developers.

Analysts maintain that the combination of forces created by the joining of these two companies would lead to greater resources to compete in a market that has increasing become driven by huge, publicly traded developers.