No Country for Public Builders

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Go private? Some publics are. Here's what Bill last said on his blog, Ear to the Ground

March 24, 2008

With apologies to the Oscar-winning Best Motion Picture of the Year, "No Country for Old Men," CEOs of the public home builders may feel they are living in an equally freaky Coen brothers film right now. Not only is their world being torn apart by a hostile housing market, crashed share prices and red ink all over the balance sheet, but they've got to worry about the Laborers International Union of North America's Pension Fund, which owns shares of a number of public builders.

That group recently pressured Meritage Homes into amending its CEO succession plan, then went after Toll Brothers, sending a letter to other shareholders asking them to withhold their votes for the re-election of Board Chairman and CEO Robert Toll, and to reject the company's proposed CEO bonus plan. (Toll was re-elected.)

For years, the largest private builders have been telling me they wanted no part of going public. We've seen some recent moves in the other direction, as First General William Lyon took his company, William Lyon Homes, back to private operations. And then, recently, Dominion Homes Chairman and CEO Doug Borror announced he'll try to do the same with his troubled firm. I have to wonder if we'll see more of this.

So I asked some big private builders what they think. Houston-based giant David Weekley of David Weekley Homes shot back an e-mail saying, "I am working on my own issues and not really paying much attention to the craziness of the public markets." But he added, "We are GLAD we are private!!!"

Tom Krobot, CEO of Atlanta-based Ashton Woods Homes, responded with a caution against LIUNA's attempts to grab headlines. His e-mail reads, in part, "Toll could bring in outside investors and possibly go private; however I don't think there is any reason to do so since this dissident group has no leverage."

Still, I wouldn't be surprised to see some smaller public companies follow General Lyon's example. The General is certainly looking very smart these days, as the bloom is certainly off the Wall Street rose!

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