B.P. John Sold to Texas Company; Tough California Regulations Cited
B.P. John Co. of Santa Ana, one of the West Coast’s largest manufacturers of wooden furniture, has been acquired by the investment arm of El Paso Electric Corp.
Although eventual relocation of the plant out of state is being considered, El Paso Electric officials said there are no immediate plans to close the Santa Ana facility, which employs 500.
Russ Mann, chief financial officer for Zeno Table Co., the holding company that sold B.P. John, said the decision to sell the reportedly profitable company was based in part on the belief that “the manufacturing environment in California because of various regulatory activities is difficult and is going to become even more difficult as time goes on.”
Financial details of the private transaction were not disclosed, but officials from B.P. John and Zeno Table, said Zeno sold only the operating assets and liabilities of the company to a holding company created by Pasotex Corp. of El Paso, Tex.
Zeno retained B.P. John’s central Orange County real estate--17.5 acres of industrially zoned land and a 300,000-square-foot building--as well as the hard-to-get air pollution offset permits that almost all manufacturing companies must have to operate in Southern California.
Zeno also kept the painting facility in which B.P. John furniture is finished and which creates the air pollutants that, according to the South Coast Air Quality Management District, make the company the 10th largest source of industrial pollution in the Los Angeles basin. In 1986, a district spokesman said, B.P. John produced 509 tons of reactive hydrocarbons, “basically, paint fumes.”
The pollution offset permits, which are marketable, are worth a reported $4 million. An offset permit is granted by the air quality board to companies that were in existence before anti-pollution controls were adopted about 10 years ago.
Currently, any new company whose operations would cause pollution, or the new owner of any existing company that contributes to pollution levels, must reduce pollution emissions either in its own facility or at some other location within the basin in order to get operating permits. An offset permit is an exemption from that requirement.
Zeno officials would not confirm that the company’s offset permits are worth $4 million, but the company’s attorney said it retained the painting facility and the pollution permits because they would have increased the selling price dramatically and probably would have killed the sale to Pasotex.
Pasotex completed its acquisition Dec. 23 and is leasing the B.P. John facilities from Zeno under a 3-year lease. The sale contract allows Pasotex to unilaterally cancel the lease with 6 months’ notice.
Although Pasotex is not planning to close the Santa Ana factory and relocate B.P. John to Texas, company officials are considering such a move as they review the economic feasibility of remaining in Southern California, said Ralph Jacobsson, vice president of sales and marketing for B.P. John.
Jacobsson said several factors would affect B.P. John’s future in Orange County. Those, he said, include the strict air-pollution controls in Southern California, the impact new federal immigration law is having on the region’s work force and the costs of doing business under California’s new minimum wage--which will be the highest in the nation at $4.25 per hour when it goes into effect in July.
B.P. John for several years has been a target of federal immigration officials, who have claimed that the company is a major employer of illegal aliens. Since October, 1985, Immigration and Naturalization Service agents have raided the firm at least three times, arresting more than 300 workers and deporting many of them to Mexico.
The last raid, on Oct. 6, 1987, resulted in the arrest of 107 B.P. John employees, 88 of whom were deported. But Ernest Gustafson, Los Angeles district director for the INS, said the company will not be cited or fined for any infraction of immigration law.
D.F. Pellegrino, general counsel for Zeno, which is owned by Newport Beach businessman Ben Bukewhige, said that neither the immigration raids nor the state’s new minimum wage was a consideration in the sale.
Instead, he said, Pasotex approached Zeno in July with an offer to acquire B.P. John’s assets but not the land or the building.
The offered price was a good one, he said, and the ability to sell the furniture company while retaining the land and the building “fit in with our future plans.”
Zeno is “looking at a number of alternatives, including developing, redeveloping or getting a new” lessee for the parcel. In all, Zeno owns 22 acres in the industrial area immediately adjacent to the U.S. Marine Corps helicopter facility in Tustin.
Pasotex’s plans for B.P. John call for continued operation of the Santa Ana facility and construction of a second plant, of about 400,000 square feet, in the area near El Paso or Las Cruces, N.M.--both areas served by Pasotex’s parent, the El Paso Electric Corp.
The furniture company is a key acquisition for the utility’s investment arm because it could bring new employment to the depressed El Paso area and because it is a huge consumer of electricity, running up an average monthly bill of $70,000 in Orange County.
Pasotex also owns a substantial interest in Westwood Lighting Group Corp. Inc. of Paterson, N.J., a major manufacturer of brass lamps.
