Potential Buyer Cites Lack of Response : Offer for Computer Automation Collapses
Already burdened by continuing losses and limited cash reserves, Computer Automation Inc. Monday revealed that a potential buyer had withdrawn its offer, marking the second time in six months that the computer test equipment maker has lost a prospective investor.
Computer Automation officials declined to comment on the collapse of the proposed acquisition by Everett/Charles Test Equipment Inc. of Pomona. Everett/Charles President Jerry Hudspeth, who had proposed buying Computer Automation and merging it into his company last December, said only that he withdrew the offer when Computer Automation officials repeatedly failed to accept it.
Officials close to the negotiations said that the deal, which called for Everett/Charles to pay $3 per share--about $1 over its current trading price--for the company, never was to the liking of the Computer Automation officials.
One negotiator said Computer Automation’s chairman and chief executive, George Pratt, opposed the deal in part because he and other top-ranking company officials stood to lose their jobs in Hudspeth’s takeover plan. Another potential source of problems for the deal, one source said, was Hudspeth’s determination to move Computer Automation’s operations out of Irvine and into Everett/Charles facilities in Pomona.
The collapse of the deal leaves Computer Automation with the same financial woes, legal problems and uncertainity over its fate that it has been facing for more than a year.
Company officials have said that without additional outside financing, either through an investment or merger, Computer Automation does not have the cash reserves to adequately pursue its business. The company has lost more than $20 million in the last three years.
Problems have been so severe that Douglas Cutsforth, the president, acknowledged in December that the company could be forced into bankruptcy.
However, sources have said that Computer Automation may be close to selling its manufacturing operations in Ireland, a move that the company has been pursuing for several months. The source said that the company could realize as much as $1 million from the sale.
The Everett/Charles deal is the second to fall apart for Computer Automation in the last six months.
In November, Kansas businessman Larry Doskocil dropped his efforts to pump another $3 million into the company after making an initial investment through the purchase of $3 million worth of the company’s debentures. Doskocil also declined to exercise an option to purchase 23.5% of the company’s stock.
Officials involved in the scuttled Doskocil investment have said that one reason for its falling apart stemmed from Doskocil’s apparent desire to take management control of the company and pick new executives, including one to replace the chairman and chief executive, Pratt.
A month after calling off his investment, Doskocil sued Computer Automation for $16 million for fraud, negligent misrepresentation and breach of contract in connection with his debenture purchase.
Doskocil had agreed not to pursue his suit during Computer Automation’s talk with Everett/Charles. However, Doskocil officials have said they would resume the suit if the talks collapsed.
