Naugles Board Advised to OK Merger

A special committee of Naugles Inc.’s board of directors has recommended that the Orange-based Mexican-American fast-food chain approve a proposed merger with Collins Foods International Inc.

The $9.9-million stock swap would give Los Angeles-based Collins the 8% of Naugles that it doesn’t already own. Collins has proposed exchanging $4.50 worth of its common stock for each of the 2.2 million shares of Naugles’ common stock outstanding.

Since the proposal was first announced Jan. 21, Naugles stock has been creeping steadily upward. It was trading Tuesday for about $3.50 per share.

If Collins stock drops below $18 per share, the company has the option of paying Naugles shareholders $4.50 in cash rather than in Collins stock. Collins closed at $19 in trading Monday on the New York Stock Exchange.

Richard P. Bermingham, Naugles chairman, said both companies’ boards now “basically have approved” the acquisition. Naugles has retained Bateman Eichler Hill Richards Inc. to review the stock swap and both boards will meet again to give it final approval before the proposal is submitted to Naugles’ public shareholders at an April meeting.

Bermingham said he expects the acquisition to be completed by mid-April.

Naugles, which went public in October, 1981, operates 171 outlets in four states.