Anaheim Firm Decides Against Alpha Merger
General Automation, a struggling Anaheim computer maker, has broken off merger talks with Alpha Microsystems and said it will team up with a British electronics firm instead.
Sanderson Electronics PLC, a supplier of business computers, has agreed to lend up to $1.75 million next month to General Automation, which has searched for financial help for several months after posting heavy losses for more than a year.
The agreement gives the British company the option of acquiring a controlling 51% interest in General Automation for $4 million.
In striking the deal with Sanderson, the Anaheim firm backed out of a $3.3-million merger agreement signed just two weeks ago with Alpha Micro, a Santa Ana computer maker.
That proposed deal followed General Automation’s severing of merger talks with another Orange County computer firm, Wespac Technologies of Irvine.
General Automation lost $11 million on sales of $51 million in its 1988 fiscal year, which ended June 30. The company lost $879,000 in the first quarter of its 1989 fiscal year. The firm’s auditors have expressed concern over the company’s ability to stay in business.
An Alpha Micro official said Tuesday that General Automation’s new agreement might violate terms of its earlier deal with Alpha Micro.
“I don’t believe their (General Automation’s) new deal is in accordance with their letter of intent with us,” said John S. Cain, Alpha Micro’s chief financial officer. “We spent considerable money and effort trying to put this deal together.”
Alpha Micro hasn’t decided whether it will contest General Automation’s action in court. “We’re still evaluating our options,” Cain said.
Joe Allen, a General Automation spokesman, said the firm wouldn’t respond to Cain’s remarks or discuss why the firm scuttled the Alpha Micro deal.
Allen said, however, that the Sanderson agreement “seems to be a better deal for General Automation and its shareholders.”
In a prepared statement, General Automation Chairman Alexander W. Giles said the Sanderson deal “will keep General Automation as an independent, publicly owned company.”
Giles said Sanderson sells computers that use the Pick operating system, a software program that controls a computer’s basic functions. General Automation manufactures Pick-based computer systems.
“The compatibility and synergy between General Automation and Sanderson is very strong since both companies sell to the same markets and through the same channels,” Giles said. “In addition, the loan from Sanderson will enable us to meet our projected inventory needs.”
Giles said the deal “strengthens General Automation financially and allows us to compete more effectively.”
General Automation and Sanderson are two of the largest sellers of Pick-based computer systems in the United Kingdom, Allen said. The Anaheim company’s operations in Great Britain account for about 30% of its annual revenue.
