RETAIL : Merrill Lynch’s Bid for S.T.S. Graphics Would Crown Broker King of T-Shirts

Merrill Lynch is hitting the surf again.

The big brokerage house with the button-down image is negotiating to buy S.T.S. Graphics of Anaheim, one of the nation’s largest suppliers of screen-printed T-shirts, says S.T.S. owner and President Danny Little.

If completed, the deal will make a Merrill Lynch & Co. subsidiary the largest silk-screen products supplier in the nation.

In January, 1989, a Merrill Lynch subsidiary bought a sizable stake in Cycle Industries, an Irvine sportswear company and T-shirt screen printing firm. Merrill Lynch bought the interest from Steve MacBaisey, Cycle’s president and chairman.

Cycle holds licenses to produce Hobie T-shirts and also owns Off Shore Sportswear, an active-wear company.

S.T.S. produces knit tops and T-shirts for department stores ranging from Bullock’s and Nordstrom to K mart and Wal-Mart. S.T.S. is a licensee of Ocean Pacific for knit tops, but also manufactures under numerous other labels, including the Teenage Mutant Ninja Turtles boys’ line and for Disneyland.

Little said the sale of S.T.S. to Merrill Lynch would involve merging S.T.S with Cycle Industries, “with S.T.S. ending up as a wholly owned subsidiary of Cycle, or maybe even Merrill Lynch.” He said the combination would make Merrill Lynch the nation’s largest supplier of silk-screened T-shirts.

S.T.S., which was founded 20 years ago, posted sales of $87 million for its fiscal year ended June 30, Little said.

The acquisition would be far from unprecedented for Merrill Lynch. Within the past few months, Merrill Lynch Interfunding bought a minority interest in Gotcha, the Costa Mesa-based surf-wear star.

Merrill Lynch executives declined to comment on negotiations with S.T.S.