Provena Food Stock Jumps $1.25 on Takeover Rumors

Apparently riding rumors of a pending takeover, stock in Provena Foods Inc., a Santa Ana pizza toppings and pasta maker, shot up by $1.25 a share Monday to close at $4.25.

Despite the 35.7% gain, however, trading in the stock remained very thin, with only 4,200 shares changing hands.

Monday’s run-up, which followed a week of sizable daily swings in the price of Provena’s common stock, prompted the company to issue a statement acknowledging that it currently is conducting “discussions regarding mergers and acquisitions.” But, the statement added, “no proposal has been made, received or discussed” and Provena “does not know the reason for recent activity in its stock.”

Went Public at $7 a Share

Provena was founded in 1972 and went public a year ago at $7 per share. Since then, the company said in its statement Monday, Provena “has from time to time had discussions regarding mergers and acquisitions.”

James Bolton, Provena’s chairman and major shareholder with 14.3% of the company’s 2.6 million shares outstanding, declined Monday to elaborate on the prepared statement.

Jeffrey Kilpatrick, president of Newport Securities, a regional brokerage in Costa Mesa that specializes in Orange County-based public companies, said he had no direct knowledge of Provena but suggested that a recent bid by Doskocil Companies Inc. to take over Wilson Foods may have prompted speculation that Doskocil--a South Hutchinson, Kan., pizza topping maker--was eyeing other firms in that same line of business.

Corporate officers and directors at Provena own nearly 70% of the company’s stock, making a hostile takeover unlikely at best.

Sales of $31 Million

Provena, according to Bolton, had total sales in 1987 of $31 million, up from $25 million in 1986. The company posted 1987 net income of $780,000, compared with $766,000 the previous year.

For the first six months of 1988, Bolton said, Provena’s revenue totaled $15.4 million and net income was $332,000--down from $436,000 for the first half of 1987. Bolton said the drop in earnings was caused in large part “by the extra costs of being a public company.”

Provena, while headquartered in Santa Ana, has only a small distribution and administrative staff in Orange County. Most of its 116 employees work at its Swiss-American Sausage Co. unit in San Francisco, which employs 64, and its Royal-Angelus pasta plant in Chino, which has 33 workers.

Distribution Unit

Customers for the company’s pepperoni and Italian-style sausage are frozen pizza processors, pizza restaurants and food distributors, and include the Pizza Hut and Round Table Pizza chains and American Home Products, which manufactures the Chef Boyardee line of Italian-style foods.

Through its Sav-On distribution unit in Santa Ana, the company also supplies food products to a number of retailers, including Target Stores and the Edwards Theatres chain.

The company raised $3.8 million in its initial public offering on Aug. 28, 1987, and used the proceeds to pay off debt and finance an ongoing expansion program, according to Bolton. In January, Provena bought back 15,000 of the 728,000 shares it issued in its initial public offering.