Early California Plans to Sell Olive Unit, Go Private

Early California Industries, the largest marketer of olives in the United States, said Friday that it intends to sell its olive operations and buy out its public shareholders in an intricate deal valued at $153 million.

The Los Angeles-based company said that, under the plan, the olive business will be sold to an as yet unidentified “multinational food company” for $90 million in cash and assumption of liabilities.

Then, the remaining assets of the company--largely the company’s struggling rice milling and bulk wine operations--would be purchased by GDM Acquisition Corp., a new company formed by Gerald D. Murphy, Early California’s president and chairman and owner of 23% of its stock. Murphy, in a telephone interview, declined to say how the buy-out of shareholders will be financed.

As part of the deal, shareholders will be paid $10 a share in cash and $5 in notes payable over a five-year period. The company’s stock, which closed up 37.5 cents a share at $9 in over-the-counter trading Friday, has a current book value of $6.10, Early California said.

The olive-processing and marketing operations account for about 25% of the company’s annual sales but in recent years have been the most profitable of the company’s businesses.

The company disclosed Friday that it lost almost $9 million on revenue of $239.6 million in the fiscal year that ended March 31, compared to a restated loss of $3.6 million on revenue of $235.96 million. The latest year’s loss included a $6.2-million provision to establish a reserve for its wine segment. In the fourth quarter ended March 31, Early California had a loss of $9.63 million on sales of $49.89 million versus a restated loss of $2.16 million on sales of $51.35 million a year ago.

Murphy said solving the problems of the company’s wine and rice businesses will “take some fairly decisive actions, and I think being a public company makes it difficult sometimes to move as rapidly or with the force needed.”

Murphy, who owns about 600,000 shares of Early California, will defer for 10 years payment of the cash he would receive for 275,000 of his shares. He will get $3.75 million for his remaining shares; the deferment is to be considered his investment in the new company, said Gerard Thomas, vice president and chief financial officer of Early California.

The company said that, in addition to Murphy, four other major shareholders--who control another 30% of the company’s 2.6 million outstanding shares of stock--have agreed to the plan. Shareholders will be asked to approve the plan at Early California’s annual meeting. That meeting is scheduled for Aug. 6 but, Thomas said, it most likely will be postponed until later that month or September.

Thomas said the company that has agreed to buy the olive business is expected to put the purchase up for a vote of its directors next week. More details of the plan should become available at that time, he said.

Early California operates two Sierra Wine wineries in the San Joaquin Valley, and its Comet Rice operations are based in Houston. Additionally, it operates a chemicals business, Chemonics Industries, in Phoenix, that makes fire retardants and does consulting in agribusiness. Last January, Chemonics sold its fertilizer operations; the resultant $1.2-million write-down for discontinued operations also contributed to the 1985 loss.