IAC Takes Sweetened Buyout Bid

Irvine Apartment Communities Inc. accepted a sweetened buyout bid from a company run by its chairman, billionaire Donald L. Bren, after some investors and analysts said Bren’s initial offer was too low.

The Newport Beach-based apartment developer said Tuesday it reached an agreement to sell the 83% of the company not owned by Bren for $34 a share cash, or $569 million. Bren initially offered $32.50 a share in December.

Shares of Irvine Apartment, a real estate investment trust, rose 94 cents Tuesday to $33. The shares are up about 20% since the first offer was made on Dec. 1. Bren is making the offer through a unit of his Irvine Co.

“We are pleased with the terms of the merger agreement, which delivers superior value to all [company] shareholders,” William McFarland, chief executive and a director, said in a statement.

The sale is subject to the approval of investors owning at least two-thirds of Irvine Apartment’s shares. The transaction is expected to be completed either late in the second quarter or early in the third quarter.

Bren’s Irvine Co. owns and is developing Irvine Ranch, the nation’s largest master-planned community. Irvine Apartment has the exclusive right to develop apartments there.

In all, Irvine Apartment owns 18,758 apartment properties. The company was spun off from Irvine Co. in 1993. Its properties are owned through a partnership with Irvine Co., which owns a 55% stake in the partnership. Irvine Co. also owns 3.4 million of Irvine Apartment’s 20.1 million shares.

Bren’s offer came as REIT stock prices tumbled last year, which made it difficult for companies to finance acquisitions and grow. Irvine Co. officials said they could more easily finance the company and grow its business if it were closely held.

In recent years, Irvine Apartment Communities has expanded beyond its core business on Irvine Ranch, buying and developing high-end apartments in Silicon Valley, northern San Diego County and Los Angeles.

After Bren made the initial bid, some analysts and investors complained it was too low. Irvine Apartment then formed a special committee of directors, headed by Anthony Frank, a former U.S. postmaster general, and Bowen McCoy, head of real estate consulting firm Buzz McCoy Associates Inc., to evaluate the offer to take the company private.

The special committee hired Morgan Stanley Dean Witter & Co. to advise it.

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Back Into the Fold

Irvine Apartment Communities, Inc., spun off into a separate company in 1993, will be reacquired by the Irvine Co. IAC has been increasingly profitable during its span as a public company. Here’s a look at the company’s revenue and earnings, in millions, and some key dates in its existence as a public entity:

Revenue

1993: $124.8

1997: $186.9

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Earnings

1993: $0.1

1997: $26.4

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Key Dates In IAC Development

1993

December: Irvine Apartment Communities, Inc. initial public stock offering priced at $17.50 per share.

1994

July: IAC buys two parcels of land in Irvine for $9.1 million, plans nearly 900 new apartments for the two sites.

1997

February: Irvine Co. chairman Donald L. Bren announces he will become IAC chief executive. The company unveils plans to expand from Orange County into the Silicon Valley..

March: Irvine Co. board of directors authorizes purchase of up to 1.2 million shares of IAC.

June: IAC buys a La Jolla apartment complex for $127 million.

July 2: Bren steps aside as president and CEO and is replaced by Irvine Co. executive William McFarland. Bren continues as IAC chairman.

July 21: Continuing its push beyond Orange County borders, IAC buys two developments--one in La Jolla and one in Milpitas.

1998

May: IAC makes first Los Angeles County purchase, $44.1 million for Champagne Towers, an abandoned complex in Santa Monica.

Dec. 1: Irvine Co. offers to buy all IAC shares it does not control for $32.50 per share or $540 million.

December: IAC stock rises 15.4% and closes at $31.56, just below its 52-week high of $32.44.

1999

February: IAC accepts Irvine Co. bid after it sweetens offer to $34 per share, or $569 million.

Sources: Bloomberg News, Irvine Apartment Communities, Times reports

Researched by LOIS HOOKER / Los Angeles Times