IF YOU HAPPEN TO WORK IN THE inner sanctum office at Newport Beach, Calif.-based William Lyon Homes these days, and “The General” suddenly appears at your desk asking you to drop everything you're doing that instant to make a call for him, you scarcely miss a beat. If you're the executive assistant's assistant, and you're on a phone call, it's no matter. You hang up immediately on the General's command. No questions. People who have dealt closely with 82-year-old William Lyon, CEO and founder of his eponymous company, over the years also don't question that it will take more than a few shareholder salvos and some government agency scrutiny to rile a man with the nerve to fly 75 commando and “gooney bird” missions over Korea.

General Lyon's mission today is clear—to reassert strategic control of his company's ownership by buying up the public's minority interest in the operation. Doubts and questions surround both his motives and his motivations, but people who know the General know he's thought it out, anticipated the noise level and the magnitude of the resistance, and has a plan to win. Besieged, maybe. Beleaguered? Never, say his colleagues. The outcome of his stock repurchase tactic could be as simple as Lyon privately arranging for the cash to pay the per-share price that the market commands, or as complex as entering into a joint venture or even—for the greatest benefit to all shareholders—selling the enterprise outright. What is certain is that General William Lyon is as strategically aware of each outcome as he is in control of his executive assistant's assistant's every instant at the office.

THE PREY This past April 26, Lyon proposed to take his publicly traded company private, offering to “acquire the outstanding publicly held minority interest in the company's common stock for $82 per share in cash.” The offering reflected a 12 percent premium over the previous five days' average closing price. Already, Lyon owned 48 percent equity interest in the company and had secured a 51 percent voting interest. Lyon's son, William H., controls 24 percent through trusts.

Minority shareholders, mystified and affronted by the April 26 initiative, got going with a series of class-action lawsuits. Charging that Lyon's going astray of fiduciary responsibility to shareholders (not just majority holders), they feel there should be more in it for them. They may be right: Shares have traded at an average of $8 to $9 over the bid price since Lyon made his offer. The market “doesn't believe the price that was offered is fair,” says Tony Avila, managing director of home building, real estate, and lodging for JMP Securities. “All builder stocks are running up like crazy, so it's going to put pressure on this deal and pressure on William Lyon if they want to get this done.”

In May, William Lyon Homes' board of directors formed an independent special committee consisting of legal counsel and investment advisers (Credit Suisse First Boston) to establish an acceptable share purchase price. As it carries out due diligence, the special committee's access to company financials—including those the General used to valuate the company's publicly held shares—is complete.


So after 50 years in home building, Lyon finds himself in regulatory agency cross hairs, battling lawsuits, and fodder for message board and cocktail party chatter. His son and Lyon's legal and financial advisers simply await further orders to strike.

WHY GO PRIVATE? Public companies occasionally revert to being privately held, frequently when a single shareholder wields disproportionate control of the company's common shares. Hardly ever, though, does the move occur without question as to the particular advantages gained: “Being a public company adds credibility,” according to First Home Builders of Florida CFO Jamie Pirrello, who has worked in both public and private home building companies. “It means that you have size; you are taken seriously.”

In William Lyon Homes' case, the reasoning for the General's strategy is a conundrum to outsiders. Likely, a variety of factors—ranging possibly from the chronically low valuation Wall Street has awarded company shares, to the onerousness of new federal accounting rules, to some X factor of future value the Lyons perceive in the assets, to some arcane estate planning advice—add up to a rationale. The fact that Lyon, his board of directors, and the team in the executive offices won't address questions adds to speculation that swirls around the company. “We just can't comment on any of that,” says president Wade Cable.

Certainly, there's financial logic to consider. “Obviously, General Lyon and his family think this business is cheap, and there is financial return from this investment that outweighs any negatives arising from not having public equity,” notes a financial source who asked not to be named.

Also, the specter of mounting costs and mind-numbing details associated with the Sarbanes-Oxley Act of 2002 (SOX) has public companies' financial executives' heads spinning in other industries. “Congress went overboard,” says Avila. “They were extremely reactionary, and [SOX] disincentivizes a lot of great people to either have a public company or have any interaction with a public company.”

Learn more about markets featured in this article: Los Angeles, CA.