More cash and more credit could be coming Levitt Corp.'s way if the deal goes through to make the Florida-based company, parent company of Levitt and Sons and Core Communities, a wholly owned subsidiary of holding company BFC Financial Corp. However, one of the conditions of the transaction's double trigger walkaway provision, which allows Levitt to back out of the deal, has been set off. The $286 million deal is slated to close sometime in the second quarter of 2007.

The proposed stock-for-stock merger is structured such that BFC, which currently has 17 percent ownership in Levitt, would give Levitt shareholders 2.27 shares of BFC stock for each Levitt share. The deal, which requires three separate approvals from various shareholder groups, also includes a double trigger walkaway provision. If BFC's stock price declines more than 30 percent from a starting price of $6.35 and BankAtlantic Bancorp's stock price drops more than 30 percent from $13.49, Levitt can terminate the transaction. (BFC has a controlling interest in BankAtlantic, with 22 percent ownership and 55 percent vote.)

At press time, BFC is trading at $4.20, which represents a 34 percent price decline. BankAtlantic's shares are worth $11.14, indicating a 17 percent price drop.

If BankAtlantic's share prices continue to slip, triggering the second provision, Levitt can terminate the transaction. BFC also can attempt to cure the situation by increasing the share exchange ratio, although it is not obligated to do so.

However, sources close to the deal say, given Levitt's financial position, it would be in the company's best interest to make the deal work, even if the double trigger provision is pulled. BFC's offer to essentially buy the company at $14.41 per share represented a 32 percent premium to market value on Jan. 30, when the deal was first announced. Today, it represents a 54 percent premium.

Levitt also will gain greater access to much-needed financial resources. The combined company's pro forma market capitalization will more than twice outweigh Levitt's stand-alone market cap of $216 million. Moreover, BFC has zero outstanding debt whereas Levitt is highly leveraged at 64 percent debt to total capital. (For a more in-depth look at Levitt's home building financials, see Big Builder's "Public Builder Report Card" in the May 8 issue.)

For BFC, the deal is a chance to grow its investment in Levitt while gaining assets at a discount. At closing, BFC will control $1.1 billion in assets on the balance sheet for $901 million, a total transaction value that includes the $286 million it agreed to pay for Levitt and the $615 million in debt it will assume from Levitt. However, because Levitt has significant investment in land, those assets are vulnerable to write downs.

Management doesn't expect the integration to cause much disruption, as BFC and Levitt have had common leadership for quite some time. Levitt's chairman and CEO Alan Levan also is the chairman and CEO of BFC, president and CEO of BankAtlantic, and chairman of vacation property management firm Bluegreen Corp., of which Levitt has 31 percent ownership.

–Sarah Yaussi

When Carl Icahn Wants You

Meet The Contenders

Carl Icahn and Jerry Starky Billionaire financier Carl Icahn is credited with saying, "You learn this in business: If you want a friend, get a dog." And that's exactly what WCI Communities CEO Jerry Starky is finding out, as Icahn launches his power play to take over the $2.1 billion home building company. Will incumbent Starkey be able to hold him off?

It's been nearly five months since Carl Icahn first knocked on WCI Communities' door looking for a deal. Recent SEC filings by WCI tell the tale of its communications and offers and counteroffers with Icahn since mid-December, offering a window into what happens when the billionaire financier decides he wants your company, or at least part of it.

–Teresa Burney

December 11, 2006

Carl Icahn calls Don Ackerman, WCI's chairman of the board, and says he wants to discuss increasing the price of the company's common stock. At that, he says he would like to buy more common stock from the company. Ackerman tells him, because the stock is undervalued, the company had no interest in selling any of its stock to him.

January 12, 2007

Icahn calls Jerry Starkey, WCI's president and CEO, to tell him that he bought more stock and that he would file a report with the SEC on the purchase. He calls the stock "cheap" and again brings up the idea of discussing ways to increase its price.

January 16, 2007

Icahn files the Schedule 13D, which says he and his subsidiaries own 14.57 percent of the company's common stock.

January 17, 2007

Starkey calls Icahn and they agree to meet for further discussions on Jan. 24. Icahn tells Starkey he would "hypothetically" consider an offer for the company for $22 a share, but that he understands that if a superior proposal emerged the board would have to take it. In that case, he says he'd be satisfied to sell his shares to such a higher bidder.

January 22 2007

WCI's board convenes via telephone to discuss, among other matters, Icahn's Schedule 13D filing and the conversations Starkey and Ackerman had with Icahn. The board, along with representatives from the company's financial and legal advisors, discusses what the board should do in the best interest of all the company's shareholders.

January 24, 2007

Icahn proposes entering into a customary standstill agreement, during which time he agrees not to launch a proxy fight or make an unsolicited bid for the company. He says he would like to buy up to 49.9 percent of the company in the open market and asks WCI to waive Section 203 of Delaware law so he can engage in transactions with the company, including a back-end merger, without having to obtain two-thirds approval from the company's noninterested shareholders. The WCI board says the action discourages "full and fair" offers and encourages "abusive offers" such as hostile offers that bypass management and the board.

January 30, 2007

The board decides to adopt a shareholders rights plan, known informally as a "poison pill," as a defensive move against a takeover. It also agrees to offer Icahn a seat on the board, if he agrees to the standstill agreement through the 2008 shareholders' meeting. After the meeting, WCI representatives call Icahn to say that it's not the right time to sell the company and that the board is unwilling to waive Section 203 because it would give preferential advantage to one shareholder over others.

January 31, 2007

Icahn's representative calls Ackerman to say that Icahn might be willing to agree to the standstill agreement, if the company amends its new shareholders rights plan to allow Icahn and other stock holders to buy as much as 20 percent of the company's stock without triggering the poison pill, waives Section 203, and gives him two seats on the board.

February 1, 2007

Ackerman calls Icahn to say if Icahn agrees to the standstill, the board would consider amending the shareholders rights plan to allow the acquisition of 20 percent of the stock and give both Icahn and another large shareholder one seat on the board. However, the company refuses to waive Section 203. Icahn rebuffs the proposal and demands that any proposal from WCI would have to include waiver of 203 and that he would agree to a customary standstill agreement for one year only.

February 5, 2007

The board discusses Icahn's latest proposal. Ackerman and Starkey call Icahn and reiterate the offer of one seat on the board and an allowance of up to 20 percent ownership in return for a one-year standstill. But, it will not waive Section 203. Icahn demands the waiver of 203 indicating that, otherwise, he would pursue other options, including a tender offer and a proxy fight.

February 7 2007

Ackerman, Charles Cobb, WCI vice chairman, and Starkey phone Icahn and his representatives again. Icahn is adamant that he will not buy anymore stock without the waiver, even if they did amend the shareholders rights provision to allow 20 percent ownership. Without that, he says he doesn't want a seat on the board and that he may initiate a proxy fight, commence a tender offer, and let the minority stock holders "hang out for a year."

February 8, 2007

The board convenes again discuss the situation with Ichan. It agrees to hold firm on its offer and publicly announces that it has retained Goldman Sachs as its financial advisor to review the company's financial, strategic, and operational alternatives to enhance the company's value to shareholders.

February 12, 2007

Icahn calls Ackerman to say he intends to announce on Feb. 16 a slate of 10 directors for election at the 2007 annual shareholder meeting and is seriously considering a tender offer for any and all shares of the WCI's stock. That is, unless the board waives Section 203 and amends the shareholders rights plan to allow Icahn, and other shareholders, to acquire up to 30 percent of the company's stock.

February 13, 2007

The board meets via telephone for an update. It considers the potential of a proxy contest and the company's response if Icahn indeed proposes a slate of directors.

February 16, 2007

WCI receives notice of Icahn's proposed slate of 10 new directors. Later that day, the WCI board meets via telephone, along with management and the company's financial and legal advisors, to discuss it. Afterward, a press release is issued saying the new slate of directors was disruptive and not in shareholders' best interests.

March 12, 2007

Icahn announces his plans for an unsolicited tender offer to buy all the outstanding shares of the company's common stock for $22 a share.

March 19, 2007

The board physically meets with its financial and legal advisors to discuss strategy.

March 23, 2007

Icahn officially commences the offer. The WCI board has a teleconference to discuss the offer with management and its financial and legal advisors. It issues another press release urging shareholders to do nothing until the board has reviewed the offer and made recommendations.

April 2, 2007

The board gets together in person with its legal and financial advisors to discuss and evaluate the offer and its fiduciary duties in addition to strategy.

April 5, 2007

The board meets in person one final time to discuss the offer and issue its recommendations.