Thrifty Corp., which agreed last month to be bought by Pacific Lighting Corp., said Monday that it has sold its interests in Crown Books, a discount book chain, and Trak Auto West, a discount auto parts chain.
Leonard H. Straus, chairman of Thrifty, a Los Angeles-based chain of drug and discount stores, said that "Pacific Lighting and we both felt it was best to dispose of these interests. . . . It was a profitable transaction and serves our purpose to stick to our own businesses and develop them as rapidly as we can."
Crown Books, of which Thrifty and Dart Group each held a 34% interest, paid $37 million for Thrifty's 2.75 million shares, which had cost Thrifty $12 million in 1980. As a result, Crown now has 5.25 million shares outstanding, of which Dart Group holds 52%. Dart Group is owned by Robert M. Haft, president of Crown Books, and his father, Herbert H. Haft.
Separately, Trak Auto Corp., which had a half ownership in Trak Auto West, a money-losing chain with 74 stores in Los Angeles, said it bought the remaining 50% from Thrifty.
In connection with the deal, Thrifty and Trak Auto each contributed $11.7 million to Trak Auto West's capital, Herbert Haft, chairman of Trak Auto Corp., said in a statement. In an interview, Straus emphasized that Thrifty accomplished its "principal goal," which was to be relieved of $40 million in loan guarantees for the struggling chain.
"There's no question about it: It's positive for Thrifty to be out of the Crown and Trak Auto situations," said Hugh F. Denison, an analyst with the Milwaukee Co. in Milwaukee. "It's in the drugstore and sporting-goods businesses. These (books and auto parts) are not businesses it understands."
Thrifty owns 555 Thrifty drug and discount stores, 27 Thrifty Jr. stores and 89 Big 5 sporting-goods stores.
Analysts said Thrifty had been hoping to find a buyer for Trak Auto West for some time. Straus was quoted as saying at the company's annual meeting in January that "Thrifty would make a great deal of money if we sold Trak Auto West. It's not exactly on the block, but if someone came along with a nice price, we'd sell."
Denison, however, said he would scarcely describe the deal announced Monday as "a nice price."
He estimated that Thrifty has recorded paper losses of about $11 million on Trak Auto West since the chain was started in 1983. Trak Auto West's losses for the first quarter ended April 30 totaled $1.2 million, an improvement from $1.8 million in losses for the same period last year. It attributed the losses to slow sales and poor profit margins in its competitive market.
Analysts said it appeared that Thrifty was willing to pay $11.7 million to reverse its so-called negative equity in Trak Auto in exchange for being relieved of the $40 million in loan guarantees.
Crown, which operates 184 bookstores in seven major cities, including Los Angeles, reported first-quarter net income of $1.35 million, up from $1.34 million in the year-ago period. Sales rose 20.4% to $31.2 million from $25.9 million. Analysts said profits have been under pressure because of a costly advertising campaign designed to gain market share.
"It's been my impression that Thrifty has not been entirely pleased with the manner in which Crown has been operated," said Sarah A. Stack, an analyst with Bateman Eichler, Hill Richards in Los Angeles.
Pacific Lighting issued a statement Monday that the Thrifty transactions would have no effect on the planned acquisition and would not affect the purchase price.
When originally announced, the merger, under which Thrifty shareholders would receive Pacific Lighting shares, was valued at $885 million. Since then, Pacific Lighting's stock has dropped in value. It closed Monday at $46.87 1/2, down 25 cents a share, making the deal worth about $806 million. The merger is subject to approval of both companies' shareholders.