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The blockbuster homebuilder deal of the year so far in the region, Lennar's $643 million proposed acquisition of WCI Communities, comes with a go-shop clause — and it might come to fruition.
The clause allows WCI's board to look for a more lucrative offer than the one Miami-based Lennar Corp. made in a deal announced Sept. 22. That offer is for $23.50 per share in cash and stock, split 50-50 for each WCI share. The transaction represents a 37% premium to WCI's Sept. 21 closing price of $17.16 a share.
Bonita Springs-based WCI has 35 days to solicit and negotiate an alternative proposal with another party.
WCI officials made no other statements about the clause in public comments and Keith Bass, WCI president and CEO, says Lennar's offer “provides our shareholders with immediate and attractive value.” Shareholders seemed to agree, pushing the stock price up 40% in the five days after the announcement, to $23.71.
But on Sept. 27, at least four law firms announced plans to investigate the proposed sale for potentially undervaluing WCI. In a statement, New Orleans-based Kahn Swick & Foti, with a partner that includes former Louisiana Attorney General Charles Foti, says it seeks to “determine whether this (offer) and the process that led to it are adequate.” Another firm, New York-based Levi & Korsinsky, which specializes in aggrieved shareholder cases, also says it's investigating the shareholder fairness of the deal. The firms seek to find shareholder plaintiffs who think the offer is to low, to move ahead with a case.
Shareholder rights lawsuits after an acquisition proposal are fairly common. But combined with the go-shop clause the suits threaten to put a cloud over the deal, which is subject to a vote from WCI stockholders, likely coming in December or January.
The size of the proposed offer also puts a ribbon around WCI's successful comeback from a 2008 bankruptcy. While the bankruptcy was bad, with debt surpassing more than half of WCI's capital, the firm's recovery was a market-fueled flourish. It emerged from bankruptcy by 2010, and in 2013 it raised $91 million in an IPO. In 2015 it posted $563 million in sales, a 133% increase over $241 million in 2012.
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