Ailing Applied Circuit Technology Agrees to Sale of Systems Division

Signaling its eventual exit from the electronics business, financially troubled Applied Circuit Technology Inc. said Monday that it has agreed to sell its computer drive test equipment unit for an undisclosed amount to an Indonesian-owned company.

ACT said the sale of its Systems division to the Sanpao Group of San Francisco will enable it to “concentrate its full resources” on the two pharmaceutical units it acquired a year ago.

The Texas investment group that last year acquired control of ACT had not been planning to sell the division, but accepting the unsolicited purchase bid was “in the best interests of the shareholders,” said Don M. Sweatman, ACT’s chairman and chief executive.

“We feel that the pharmaceuticals industry is the area where we should focus and concentrate the existing assets we have,” said Sweatman, who assumed his posts in December after the investment group of which he is a principal acquired a 33% interest in ACT.

Although Sweatman would not disclose the purchase price, he said Sanpao will pay half in cash, with the balance due in notes payable over a two-year period. ACT will realize a “substantial gain” from the sale, which will “help the shareholders’ equity very considerably,” Sweatman said.

Equity Fell

During the year that ended Oct. 31, ACT’s shareholders’ equity plummeted to $3.9 million from $12.7 million a year earlier.

Sanpao officials could not be reached for comment Monday.

Sweatman said the San Francisco electronics company is owned by a “very substantial entity out of Indonesia.”

As previously reported, ACT has been offered $1.5 million for its only other electronics operation, the ACT/Magnetic Technology service and repair unit. ACT has received a letter of intent from the unit’s purchaser, but a final agreement has not yet been reached, Sweatman said. ACT has declined to identify the purchaser.

Both the Magnetic Technology and the Systems units are expected to remain in Anaheim and no layoffs are anticipated, Sweatman said. The Systems operation has about 65 employees and the Magnetic Technology unit has 41 employees, he said.

Once the divestiture of the two units is complete, Sweatman said, ACT plans to change its name and relocate its headquarters to Gardena, where its Whiteworth International Inc. and Towne Paulsen pharmaceuticals units are based.

Medicine Manufacturer

Whiteworth, which was acquired for $2.1 million in cash and notes early last year, manufactures over-the-counter medications. Towne Paulsen makes generic drugs. Together, the two units contributed $11 million of the $19.8-million in revenue that ACT reported for the fiscal year ended Oct. 31, Sweatman said.

During that 12-month period, ACT had an $8.9-million net loss, compared with a $401,153 net loss a year earlier. The fiscal 1986 net loss included a $1-million writedown taken in anticipation of the sale of the ACT/Magnetic Technology service unit.

Once its reincarnation as a drug company is complete, ACT plans to start a research and development program and “will pursue many of the generic drugs that come from out under patent protection,” Sweatman said.

Sweatman said a “strong possibility” exists for ACT to become profitable during its current fiscal year, particularly if the company can restructure some of its debt. During its fiscal 1986, ACT made $680,000 in interest payments on $7.2 million in debt.