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Schuler buys
Calif. builder

Western Pacific Housing
is the sixth largest
in the state

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By Rob Perez
Star-Bulletin

Schuler Homes Inc. is buying the sixth-largest home builder in California, effectively doubling the size of the Honolulu-based company in a deal worth about $380 million.

The all-stock transaction between Schuler and privately held Western Pacific Housing will create a company that over the past year has generated more than $1 billion in combined revenues and delivered a total of 4,600 homes.

Schuler said the merger continues its strategy of diversifying its operations to cover top markets in the Western United States.

"This combination takes the company to a new level in terms of scale, market penetration, financial resources and management depth, merging two companies with proud traditions, proven track records and profit margins which are among the highest in the industry," said James Schuler, Schuler Homes' president and chief executive.

He owns about 52 percent of Schuler's stock.

He will retain those titles under the combined entity and become co-chairman, sharing that latter title with Eugene Rosenfeld, current chairman, CEO and founder of Los Angeles-based Western Pacific.

A newly formed holding company, Schuler Homes Inc., will acquire the operations of Schuler and Western Pacific and will remain public. Homes will continue to be marketed under the Schuler and Western Pacific names.

Current Schuler shareholders will receive Class A common stock in the newly formed company on a 1-to-1 basis, giving them about 20 million shares.

Western Pacific's investors will transfer their interests in exchange for about 20 million Class B shares of the holding company. The Class B shares will have 0.5 votes per share and be convertible to Class A shares upon sale or upon certain events, which were not specified in the company's late-morning announcement of the merger.

The Class A shareholders will elect five of the holding company's board of directors, effectively giving them control of the nine-member board.

Schuler Homes will continue to be based in Honolulu.

The company's stock in recent days has been particularly volatile

On Thursday, the company's shares soared 22 percent to close at a 52-week high of $11.50 on heavier-than-normal trading. It fell 13 percent the following day.

Schuler closed at $9, up 12.5 cents, today in trading that was halted pending the announcement.

Pending shareholder and regulatory approval, Schuler Homes expects the deal to close by December or early 2001.

The company said the merged firm will be among the 15 largest U.S. homebuilders.