General Automation Will Get Boost From Sanderson Electronics
General Automation, a struggling Anaheim computer maker, said Monday that it has reached a definitive agreement with Sanderson Electronics PLC in England to obtain a financial infusion of up to $4.1 million
As part of the deal, General Automation has restructured its top management and plans to lay off about 65 of its approximately 390 employees. About a dozen employees based in Orange County will be included in the work force reduction.
On Friday, Sanderson gave General Automation the first $500,000 of a $1.75-million loan and will provide the rest by Jan. 23, a spokesman said. The loan funds will be used to shore up General Automation’s computer manufacturing operation.
General Automation has been losing money for more than a year. It posted an $11-million loss for the fiscal year ended June 30.
But the company’s new chief executive was upbeat, attributing losses to past problems.
Fresh Blood
“This is exactly what the company needed--a shot of fresh blood,” said Leonard Mackenzie, General Automation’s vice chairman and newly installed chief executive. “This is a very good deal for our customers, our employees, our shareholders--everybody.”
The losses have not eroded customer service, he said, and the firm expects sales to rise. The company also has reduced its worldwide operating expenses by $2 million a year as part of a cost-cutting plan, Mackenzie said. In addition, the company is negotiating to sell non-essential operations, which were not specified.
The company’s stock, he said, will continue to be traded on the American Stock Exchange, where it closed Monday at 50 cents a share, down 6.25 cents.
A tentative deal with Sanderson was hammered out 2 weeks ago, capping a series of merger discussions with several potential suitors. An unspecified number of interested companies never got beyond the initial talking stages, said Joseph Allen, a company spokesman.
In order to accept Sanderson’s offer, General Automation had to spurn a merger bid by Alpha Microsystems in Santa Ana. Earlier in the fall, General Automation executives were talking with WesPac Technologies in Irvine about a possible merger.
Compatible Businesses
Mackenzie said company executives liked the fact that Sanderson’s business is compatible with General Automation’s. Like the Anaheim firm, the British firm specializes in the Pick operating system, a software program that controls a computer’s basic functions.
Sanderson is less than a third the size of General Automation. In U.S. dollars, it earned $1.3 million on sales of $15 million last year, Mackenzie said. General Automation’s revenue for the fiscal year ended June 30 was $50.9 million.
Besides the dozen layoffs expected in Orange County, the firm will cut about 40 employees from its operations in England, where General Automation is consolidating two plants into a Birmingham facility it acquired last year when it bought Aston Technology Ltd.
The rest of the layoffs will come from operations elsewhere in the United States, primarily Dallas and New Jersey, Allen said. The layoffs are in addition to about 50 positions trimmed through attrition since June, the company said.
Under the deal, Sanderson will be able to convert its $1.75-million loan into 2.5 million shares of newly issued common stock in General Automation. In addition, Sanderson will receive about 200,000 shares in lieu of loan fees.
The British firm also will get warrants that will allow it to purchase up to 2.9 million additional shares of newly issued General Automation stock at 70 cents a share by midsummer. If the warrants are exercised, the proceeds will be used for working capital, Allen said.
If Sanderson converts the loan and exercises its warrants, it will wind up with 5.6 million General Automation shares, or a controlling interest of 51%. Even so, Mackenzie said General Automation expects to remain autonomous.
“Sanderson is looking at this as an investment,” Mackenzie said. “The company will still operate as General Automation.”
Sanderson, however, has appointed three of its executives to General Automation’s six-member board.
One of them, Paul Thompson, 36, is the Anaheim company’s new chairman. He replaces Alexander W. Giles Jr., who was named chairman in a restructuring in August. Giles will remain on the board as one of three board members from General Automation.
Mackenzie, who had been chairman for 8 years until the August restructuring, became chief executive, replacing W. Norris Agee, who resigned as president, chief executive and director after 5 months on the job. Mackenzie has previously held the posts of president and chief executive.
Two other directors, lawyers William Lucas and John C. Conlan, also resigned to make room for Sanderson directors.
General Automation also named Douglas C. Tullio as president of its North American operations. Together with presidents of Pacific Rim and European operations, he will report to Mackenzie. The office of president is being eliminated, Mackenzie said.
GENERAL AUTOMATION AT A GLANCE
Headquarters: Anaheim Number of Employees: 400 Products: Computer systems and products Earnings (loss): ($11 million)* Sales: $50.9 million* 52-week stock price range: $2.375/$0.3125 Monday’s closing stock price: $0.50 Shares outstanding: 5,637,388 (March 31) Market value of common stock: $2.8 million * Year ended June 30
