WCI and Icahn Agree
On New Board Structure

WCI Communities Inc. Monday unveiled a new board that indicates a truce with billionaire activist Carl Icahn and gives the luxury condo developer more time to weather the worst housing downturn in decades.

The Bonita Springs, Fla., company, which is expected to report a second-quarter loss Wednesday, agreed to a board structure that includes Mr. Icahn, the company's largest shareholder; Don E. Ackerman, the current chairman; and seven others -- two from Mr. Icahn's side, two from WCI and three to whom both sides agreed.

Separately, the company announced amended credit lines, one reduced by $150 million and, because of the proposed board change, a waiver against a possible default declaration. WCI also raised the level at which a so-called poison-pill provision against hostile takeovers would kick in, to 25% from 15%. Mr. Icahn owns nearly 15% of the stock, according to FactSet research.

WCI's stock, halted at $7.32 before the news, jumped to $9.64 after the release, before retreating to $7.95, up 19 cents on the day and 61% above its 52-week low of $4.95 on Aug. 3. The stock, however, remains down 59% year to date and 67% from its 52-week high of $24.20 on Feb. 16.

Jerry Starkey, WCI's president and chief executive, declined to comment, and Mr. Icahn wasn't immediately available. In the statement, Mr. Icahn labeled the board shakeup "a win for both WCI shareholders and the company."

Not everyone was so excited. Alex Barron, an analyst with Agency Trading Group, pointed out that the housing market is still weak and the news doesn't bring WCI any home buyers.

"All the fundamentals are still the same," he said.

Either way, the flurry of announcements should herald an intermission in what has become an industry soap opera.

"They're getting peace and quiet and time," said Joe Snider, vice president and senior credit officer for Moody's Investors Service, which monitors WCI's debt. The news "permits the company to look for alternative sources of capital without worrying about fending off an unfriendly takeover attempt."

The drama started earlier this year when Mr. Icahn increased his holdings in the company and made a tender offer of $22 per share for the company -- a 16% premium at the time. WCI, which also builds traditional homes, responded by enacting a poison-pill provision, engineered to thwart a hostile takeover, and putting itself up for sale in April. Mr. Icahn nominated his own slate of board candidates.

In the last few months, the housing market has grown increasingly grim. Inventory is rising along with foreclosures, forcing lenders out of business. Those who remain are tightening requirements, particularly in Florida, which has a record number of condos on the market. Option One Mortgage, for example, recently said it won't fund any Sunshine State condo purchases.

WCI, which said last month that no one has bid on the company, previously pushed back its annual meeting from mid-June until Aug. 30. As the stock fell -- it is down more than 60% in the last three months -- some industry watchers wondered if Mr. Icahn's candidates stood a better chance of being elected.

"If I was that board of directors, I would not have wanted to face the stockholders after the poor business decisions and horrific press releases in 2007," said Jack McCabe, chief executive of McCabe Research & Consulting, a residential research firm in Deerfield Beach, Fla. "It was a very smart move for the long-term success and viability of the company."

Under the agreement announced Monday, WCI's board lineup also includes current WCI board members Charles E. Cobb Jr. and Hilliard M. Eure III. In addition to Mr. Icahn, the Icahn Group's candidates include Keith Meister and David Schechter. Both sides agreed to nominate and approve Craig W. Thomas, a portfolio manager at S.A.C. Capital Advisors LLC; Nick Graziano, a managing director of Sandell Asset Management Corp.; and Jonathan R. Macey, a Yale University law professor.

"I am confident the new board will make the right moves to enable WCI to weather the difficult industry conditions it is facing today and position itself for a bright future," Mr. Icahn said in the statement.

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