Watson Plans Offer for 51% of Fabulous Inns
Charles Watson, chairman of Watson General Corp., a near-dormant corporate shell, said Thursday that he intends to make a tender offer for 51% of the common shares of Fabulous Inns of America, the Mission Valley hotel company that has been embroiled in a yearlong legal battle for control.
Watson said he will offer $4 per share for about 1 million Fabulous Inns shares. He said that financing will be provided by two out-of-town financial institutions that he declined to identify. The offer, he contended, “will stop all of the litigation” that has engulfed the company.
Fabulous Inns’ current chairman, Jeffrey Krinsk, was a dissident shareholder who ousted the then management in 1984 after accusing it of conflict of interest and other wrongdoing. He and the officers he helped to replace locked horns in 10 weeks of hearings in 1984 and this year to determine who controls the small but profitable hotel company, which has assets estimated at more than $10 million.
After the hearings, Superior Court Judge G. Dennis Adams ordered the ousted management to be re-seated as directors, but the 4th District Court of Appeal stayed the order in May. A final appeal court ruling is expected soon.
Who owns the stock that Watson wants to buy is the main issue to be decided by the jurists, and that uncertainty would seem to cloud any tender offer.
Krinsk said Thursday that he has not received a formal tender offer from Watson but he called any such offer “unrealistic, given the circumstances that Fabulous Inns is involved in. To the best of my knowledge, there are no lenders, there is no deal and there is no credibility.”
Watson is a founder of Fabulous Inns, along with ousted President Walter L. Palmer. The two men were among six former company directors and executives sued by Krinsk a year ago for alleged fraud, illegal purchases of company stock, securities violations and self-dealing. Watson was later dropped from the suit after agreeing to testify against his former associates in the stock-ownership hearings.
“I like the way Fabulous Inns is right now,” he said Thursday, adding that he would keep the current management in place if he gains control of the company.
Watson has a checkered past. In 1967, the Securities and Exchange Commission barred him from being associated with any stock broker or dealer. Authorities claimed that he violated securities laws by using his client’s stock for his own use and making false entries in financial books and records.
His company, Watson General Corp., has only about $27,000 in assets and trades over the counter for about 25 cents per share. It has tried to acquire three companies--Marathon Systems, Japusa and Tek-Pharma--over the past 15 years. In each instance, the company ended up either in bankruptcy or embroiled in bitter litigation with Watson General.
