Ailing Cardis Discusses Sale of Tuneup Masters
Debt-laden Cardis Corp. said Tuesday that it has entered “serious” negotiations to sell its Tuneup Masters subsidiary to raise cash.
Cardis, which recently moved its headquarters from Beverly Hills to Buena Park, would not identify potential purchasers or discuss a sales price.
But Blake Childs, an analyst at Bateman Eichler, Hill Richards Inc., estimated that Woodland Hills-based Tuneup Masters could bring $60 million to $70 million.
The quick-fix auto repair shop chain has 232 garages in eight Western and Southwestern states. The company was purchased by Cardis in September, 1986, from racing executive Andy Granatelli in a cash-and-stock deal valued at $53.4 million. A Cardis spokesman said Tuesday that Tuneup Masters has been consistently profitable and that sales totaled $42 million for the company’s 1986 fiscal year, ended last Sept. 30.
Cardis has retained the investment banking firm of Bear Stearns Cos. to help restructure its more than $100 million in debt and said the firm is assisting in negotiations, which could produce a sale in the next 30 to 60 days.
Cardis, the nation’s third-largest auto parts distributor, said it has abandoned previously announced plans to spinoff 40% of Tuneup Masters in a public offering. The offering was canceled because Cardis has been unable to obtain an accountant’s opinion on its financial statements, spokesman David W. Olson said.
Olson said the company’s inability to generate cash from a public offering caused it to postpone payment of some debt and increased its interest expenses. He said interest expenses totaled $19 million for an 18-month period ending April 30.
Cardis has been unable to win further extensions on debt payments to Security Pacific National Bank, its largest creditor, and has a $25-million payment due Oct. 31 and $9 million more due Nov. 30, Olson said. The bulk of the debt is due by Jan. 31, 1988, the company said.
Cardis also must meet payment on a $43.5-million loan from Dresdner Bank, a West German institution, by Oct. 23. Cardis borrowed the money from Dresdner to purchase Tuneup Masters. The loan was due last Dec. 31, but was extended and now is payable on demand.
Failure to meet the deadlines could force Cardis into bankruptcy proceedings, but the company denies that bankruptcy is being considered.
Cardis reported losses of $35.5 million and sales of $349.3 million for the 18 months ended April 30. The company said Tuesday that it lost an additional $5.6 million in its first 1988 quarter ended July 31.
