Icahn Prepares Bid
For WCI Communities

With the housing sector reeling from slowing sales and growing defaults on subprime mortgages, Carl Icahn has made an offer to buy for WCI Communities Inc., a home-building company focused heavily in one of the nation's weakest markets, Florida.

Mr. Icahn, who had acquired a sizable stake in WCI in recent months, says he intends to initiate a tender offer of $22 a share for a company known for building Florida high-rise luxury condominium towers.

The bid, a 16% premium to Tuesday's closing price, is conditional to WCI's board pulling the recently enacted "poison pill" provision, which would ward off a possible hostile take-over. The offer values the Bonita Springs, Fla.-company at $924 million.

WCI has underperformed its peers for years and its shares have traded below its book value, which is a rough estimation of what the company would be worth if it were liquidated.

"We believe that the board and CEO of WCI have not enabled the Company to maximize the potential of its unique assets, which trade a discount," Mr. Icahn said in a statement.

The bid is by no means a slam dunk for Mr. Icahn, who last fall made an unsuccessful takeover play for Reckson Associates Realty Corp., a real-estate investment trust.

Analysts say WCI's board may reject Mr. Icahn's offer, believing that the company's land in Florida is worth more than Mr. Ichan's offer.

"I think the [board members] turn it down because they have poison pill and maybe they think it is worth more in their mind," said Credit Suisse analyst Ivy Zelman.

Mr. Icahn's interest in WCI has puzzled analysts and investors who have wagered the company's stock would fall. While many builders have been hurt by the housing downturn, WCI has struggled more than others. Unlike entry-level builders that may have greater exposure to the riskiest borrowers who use subprime mortgages, WCI's problem stems from an oversupply of expensive condos in a sharply slowing Florida market.

The company's cancellations exceeded the number of new orders in the fourth quarter and it has a high amount of debt, compared to other builders.

Nonetheless, many analysts believe WCI will stay afloat as hundreds of condos close this year, generating as much as $1 billion in cash that could be used to pay down the debt. While other builders have faced waves of cancellations by skittish buyers, WCI requires buyers to put down a 20% deposit on condos that cost an average of $1 million -- a sum that could prevent buyers from walking away.

Banc of America Securities analyst Dan Oppenheim says he doesn't believe Mr. Icahn's bid will lead to wider "M & A or private-equity activity in the sector, but view this as a unique situation."

Others say the home builders are ripe for additional consolidation. Gopal Ahluwalia, a staff vice president for research at the National Association of Home Builders, says he believes there could be significant mergers of building companies by the end of the year, as builders seek to expand their presence in the most promising markets in time for a housing recovery. "Companies want to grow, they want to diversify geographically," Mr. Ahluwalia said.

Email your comments to rjeditor@dowjones.com.