Investors Reap Big Yield as Elgar Electronics Is Sold

A $1.3-million equity investment three years ago has generated more than $38 million in profit for management, investors and employees of Elgar Electronics Co., a San Diego-based manufacturer of power supplies that was acquired Friday by a British concern.

In 1986, Elgar chairman Paul Zecos gathered up $1.3 million in cash from employees and investors and borrowed $5.6 million more to buy Elgar from parent Cummins Engine. At the time of the management buy-out, Elgar was in dismal shape, having lost $7 million over the previous three years, he said.

But 33-year-old Zecos, who says he holds a graduate business degree from Harvard and two engineering degrees, turned things around quickly at Elgar. And Friday, Zecos announced the company was being sold to Dobson Park Industries of Wigan, England, for $40 million.

Dobson Park, a publicly traded British mining concern with $500 million in sales, is trying to diversify into higher-growth industries through purchases of companies such as Elgar, Zecos said. The new owner plans to make no substantial changes at the company.

For the fiscal year to end this September, the company expects to post a $6.5-million profit on $38 million in sales, up from a $2.8 million profit on $25 million revenues for the previous year. Elgar’s products are used to regulate the flow of power to a variety of computers and instruments.

Zecos and family members owned about 15% of the stock. Other stockholders included members of Elgar management and venture capital firms Enterprise Partners of San Diego, MBW of San Francisco and T. Rowe Price of Baltimore.

Zecos said he will stay on as Elgar’s chief executive for one year before resigning. Certain other Elgar managers have agreed to stay on for three years. Before joining Elgar in 1984, Zecos held executive positions at General Electric specializing in “turnarounds.”