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Gradco Buyout Fails; Financing Unavailable

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TIMES STAFF WRITER

Gradco Systems Inc. Chairman Keith B. Stewart, confirming Wall Street rumors, said Friday that his efforts to secure financing for a management buyout of the office equipment manufacturer have been unsuccessful.

Gradco’s stock tumbled for the second consecutive day, falling $1.625, or 11.7%, to $12.25 a share. It was the third most actively traded over-the-counter stock, with more than 2.1 million shares changing hands--about 10 times its average daily volume. On Thursday, Gradco’s stock dropped $2.375 a share.

Stewart said the management group has been unable to round up financing for its proposed leveraged buyout of the world’s largest supplier of collators and sorters for office copiers. But he said the group is continuing its efforts to raise money for the deal.

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“We believe the widely reported changing environment in the financial markets with respect to leveraged transactions, among other factors, contributed to the decision” by lenders not to provide financing for the deal, Stewart said.

Financing for leveraged buyouts all but dried up after the $6.75-billion buyout of UAL Corp., parent company of United Airlines, fell through in October. It prompted the Oct. 13 stock market crash.

Stewart said Gradco is “engaged in discussions with a senior lender and we will be pursuing other sources for the subordinated financing.”

The Dow Jones News Service, quoting unidentified Wall Street traders, reported that two Japanese firms that were expected to finance the deal--Yasuda Trust and Yamaichi Securities--have decided to proceed more slowly on the financing arrangements.

Also Friday, Gradco said that product shipments for the six months ending March 31, 1990, will be lower than anticipated primarily due to delays in the introduction of several new products by Gradco’s customers. Gradco is a supplier to most of the leading manufacturers of office copiers.

Stewart, Gradco’s founder, originally announced in late September that he was trying to arrange financing for a buyout.

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