Fewer Firms Go Private in Buyouts, Forbes Says

Leveraged buyouts that have taken many companies out of public hands slowed considerably in 1989, but the megabuyout of RJR Nabisco Inc. catapulted the food and tobacco giant to the No. 3 spot on Forbes magazine’s list of 400 largest private companies in America.

Cargill, the international marketer of agricultural and bulk commodities, topped the list for the fifth straight year.

And taking fourth place close behind RJR Nabisco was Oakland-based grocery chain Safeway Stores, with revenue of $13.6 billion.

Forbes said in its Dec. 11 issue that only 16 entries on the list went private this year in leveraged buyouts, down from 49 last year.

Forbes ranked the 400 largest private firms according to their estimated or reported total sales during the most recent fiscal year.

Minneapolis-based Cargill reported 1988 revenue of $43 billion, up $5 billion from the previous year and more than double that of the second-largest company on the list, Koch Industries, the Wichita, Kan.-based oil company with sales of $16 billion.

Forbes estimated that RJR Nabisco had sales of $14 billion last year, ranking it third after the company was taken private by the New York buyout firm Kohlberg Kravis Roberts & Co. The $30-billion leveraged buyout was the biggest corporate takeover ever.

A leveraged buyout is a corporate acquisition financed mainly with borrowed funds that are repaid with cash from the target company’s cash flow or from the sale of its assets. The technique has raised concerns among some critics who believe that such debt-burdened companies are more likely to fail during an economic downturn.

Forbes defined a private company as one that has no publicly traded stock. There are about 7 million private U.S. companies, compared to roughly 10,000 firms that are public.

There were 37 supermarket chains on the Forbes list, led by Safeway. The only other California-based company to crack the top 20 was 18th-ranked Bechtel Group, the San Francisco engineering and construction concern.

There were 30 California firms on the Forbes list. Los Angeles is home to nine of them. The biggest are A-Mark Financial, a precious metals firm ranked 121st with estimated revenue of $1.18 billion and Hughes Markets, the grocery chain, 181st with sales of $885 million.

Two Los Angeles firms were among a group of seven tied at 186th with reported or estimated revenue of $850 million: Pacific Holding, a diversified concern headed by David H. Murdock, and American Protection Industries, which has burglar alarm and flower delivery businesses and owns the Franklin Mint.

Other Los Angeles firms: Young’s Market, a food and liquor wholesaler, ranked 209th with sales of $779.9 million; Shapell Industries, a construction and land development firm ranked 220th with sales of $746.9 million; Watt Industries, a real estate firm ranked 271st with sales of $622 million; Ticor, title insurance and real estate tax services firm ranked 316th with sales of $549 million; and Quality Foods International (formerly Boys Markets), which has supermarkets, ranked 317th with sales of $547 million.

Firms on the list from elsewhere in Los Angeles County: Thrifty Oil, an oil and convenience store company based in Downey ranked 156th with estimated sales of $980 million; PMC, a specialty chemicals firm in Sun Valley ranked 229th with estimated sales of $710 million; and two Pasadena firms--Golden State Foods, a food processor and distributor, ranked 157th with sales estimated at $960 million, and Parson Corp., an engineering and construction firm ranked 232nd with sales of $706.5 million.

Five Orange County firms made the list, including three Newport Beach real estate firms: William Lyon Cos., ranked 96th with sales of $1.39 billion; Irvine Co., ranked 285th with sales of $607 million; and Koll, ranked 380th with sales of $454 million. Two others were from Irvine: Restaurant Enterprises Group, ranked 118th with sales of $1.19 billion; and Lusk Co., a real estate developer, ranked 363rd with sales of $487 million.

Three other Southern California firms were listed. Two were from San Diego: Foodmaker, parent of Jack in the Box and Chi-Chi’s restaurants, ranked 124th with sales of $1.1 billion; and Science Applications International, a research and development firm and systems integrator ranked 185th with sales of $865 million. The other Southern California firm was Upland’s Lewis Homes Group, a builder, ranked 346th with sales of $500 million.