Gradco May Spin Off Its Printer Products Wing : Markets: The company would seek to maximize shareholder value by separating Irvine-based Gradco Printer Systems Inc. and copier-related Gradco Japan.
Gradco Systems Inc., a struggling copier and printer products company that is in a proxy fight with its biggest shareholder, said Tuesday that it will explore a plan to spin off its printer products unit to existing shareholders.
Under the plan, the company would seek to maximize shareholder value by separating Irvine-based Gradco Printer Systems Inc. and Gradco Japan, which is engaged in copier-related business, into separately traded entities.
As part of the plan, Gradco said it will pay down all of the existing Gradco Systems debt, write off certain business assets and function as a holding company owning shares of Gradco Japan, which makes the company’s staple sorter products for office copiers.
Keith B. Stewart, chairman and chief executive of Gradco Systems, said the disparity between the businesses and fundamentally different markets has produced “confusion” among company shareholders. In the spinoff plan, the profitable copier products plant will provide initial working capital to the money-losing printer business.
Stewart said the printer systems unit has high-growth opportunities and will seek a strategic partner in the future. He said Gradco is reviewing the feasibility of the plan, but no definitive action will be taken before the company’s annual meeting on Oct. 12.
Gradco stock closed Tuesday at $6.50, up 50 cents, in over-the-counter trading.
The announcement is Stewart’s first counterpunch to Martin E. Tash, who as Gradco’s biggest outside shareholder started a proxy battle to take control of the company’s board of directors in August. Tash also filed a shareholder lawsuit against Stewart and top Gradco management, alleging that they tried to misappropriate the assets of Gradco Japan.
Tash, chairman of Plenum Publishing Corp. in New York, and his company control 9.4% of company stock. Tash is seeking to replace Gradco’s board with his own slate of candidates at the annual meeting. Tash could not be reached for comment Tuesday evening.
Gradco said it is willing to settle the suit, which the company said jeopardized efforts to take its copier unit public in Japan. But Gradco said Tash has not responded to its overtures. Tash said Friday that he would not negotiate a private settlement that does not affect all shareholders.
The company reported operating losses of $2.3 million on revenue of $20.3 million in its first quarter ended June 30, largely because of the loss of its biggest customer, Xerox Corp. In its fiscal year ended March 31, Gradco lost $28.1 million on revenue of $89.5 million.
