Texas Group Buys 33% Interest in Applied Circuit
A Texas investment group said Wednesday that it purchased a 33% interest in Applied Circuit Technology Inc. of Anaheim and is taking over management of the ailing maker of electronics equipment and generic drugs.
Locke-Sweatman Investments of Austin, Tex., said it bought 4 million shares of ACT held by its founder, chairman and chief executive, J.V. Taylor, for between $3 million and $5.5 million.
Under terms of the agreement, Taylor will receive 75 cents per share, plus 50% of any increase in the value of company stock up to $2 per share occurring before the purchase payments are completed. The maximum price would be $1.375 per share.
In over-the-counter market trading Wednesday, ACT shares closed at 50 cents each, unchanged for the day. During the past year, ACT shares have traded for as much as $1.625 each and as low as 25 cents apiece.
Don M. Sweatman, a principal in the investment and management firm, said the change in control at ACT will help the troubled company generate new capital and focus its attention on operations with the greatest money-making potential, the Whiteworth International generic drug business.
“We see a great amount of potential in Whiteworth because it has not been managed properly for the last two years,” Sweatman said. “We expect to put a cash infusion into the business to get it going.” He said the investor group believes that there is a potential to double the revenues of Whiteworth, which are currently running at an annual rate of about $19 million.
Sweatman said the new investors would also try to breathe new life into the division that makes test equipment for computer disk drives, an operation that has been brought to a near standstill during the computer sales slump.
For the first nine months of the fiscal year that ended Oct. 31, the company lost $4.8 million on sales of $13.4 million. In the prior year, the company had nine-month profits of about $69,000 on sales of $13.5 million.
“On a Decline”
“We know the company has been on a decline,” Sweatman said. “But it has not been properly directed. . . . We think the company has assets that can be managed differently for more revenues and profits.”
However, Sweatman said that he and his principal partner, Larry V. Locke, 41, do not have extensive backgrounds in managing either drug manufacturers or high technology companies. The two have been involved primarily in real estate and oil and gas operations, with some activity in explosive chemicals and electronics.
Sweatman said the partners do not view the ACT investment as a “distress sale” purchase. He stressed that the two view the company as a cornerstone to possible future acquisitions in the technology industry.
Taylor’s stock sale comes less than three months after he assumed more responsibility at the company following the abrupt resignation of former president and chief operating officer Walter R. Menetrey. Menetrey resigned a day after the company announced its third-quarter results, a stunning $1.9-million loss.
Taylor said he sold most of his holdings in the company he founded 10 years ago because he needed a rest and because he felt the company would profit under new, vigorous management. Taylor, who had been the company’s largest single shareholder, will continue to own about 788,600 ACT shares and will serve as a director and consultant for the next 18 months.
The agreement calls for Sweatman to succeed Taylor as chairman of the board and chief executive. Sweatman will also serve as president. Locke will serve on ACT’s board of directors.
