Parker Automotive Gets ‘Substantial’ Cash Offer : Assets: The unidentified investor would help keep the troubled company afloat in return for stock and several management concessions.
Parker Automotive Corp. on Monday confirmed that it is discussing the sale of a substantial portion of the company to an unidentified investor to raise enough money to keep the company going.
Under the terms of the deal, according to a statement released by the investor, it would receive notes convertible to common stock at 50 cents a share in return for a “substantial” investment of cash in the publicly owned company.
The investor wasn’t identified in the statement, and the company declined to name it.
The troubled company was surprised by the statement, which was attributed to the company and disseminated by a San Francisco public relations firm, John Williams & Associates, Ltd. Parker officials, however, confirmed the facts in the release.
The statement released Monday said the investor would also get an option to buy “substantial amounts” of the company’s common stock at $1 per share in return for the cash infusion.
The statement quoted Eric A. McAfee, Parker’s chief financial officer, as saying the investment was contingent on several actions: the resignation of a majority of Parker’s board, including company founder Michael E. Parker; that the company “pay or settle a significant portion” of its debt, and that the investor would obtain voting control over the shares owned or controlled by Parker and an option to buy the shares at $6.50 a share.
A company spokesman said Parker owns or controls a total of 2.2 million shares of the thinly traded firm, a maker of fuel-cleaning systems for automobiles. Parker, former company president and chief executive, is still serving as chairman, although the company announced in December that he was resigning involuntarily because of legal problems involving another company.
Diane M. Parker, who is the company’s spokesman and Michael Parker’s sister, said the company had discussed releasing the terms of the proposed investment agreement last week, but the directors decided to wait until the deal was consummated.
“However, apparently this investor felt it was in his best interests to make a release at this time,” she said.
McAfee was quoted in the statement as saying a cash infusion “is necessary to enable (Parker Automotive) to continue operations.” He was further quoted as saying the proposed investment in the company would “strengthen (its) financial stability and provide it with new operational leadership.”
McAfee, who could not be reached for comment, also was quoted in the statement as saying there was no guarantee the deal with the investor would close but that an announcement would be forthcoming “in the next few days.”
Parker resigned as president in September and as chief executive in November after creditors of Parker North America Corp., another company he owned briefly and which is now in bankruptcy, seized control of Parker Automotive through a court-appointed receivership. The creditors charged that PNA funds were improperly channeled to Parker Automotive, an allegation Parker denies.
In the statement, McAfee was quoted as saying the company needed more cash because of problems stemming from its temporary receivership, the subsequent loss of the company’s line of credit, the resignation of its president and the resignation of the company’s accountants.
McAfee also was quoted as saying the company was hurt by the layoffs of “significant” numbers of employees recently, an “inability to raise alternative financing in a timely manner” and poor financial results for the third quarter.
Parker Automotive recently reported in a filing to the Securities and Exchange Commission that it lost $2.9 million on sales of $568,000 for the quarter ending Nov. 30, contrasted with a loss of $964,000 on sales of $340,000 in 1989. The figures aren’t audited, according to the filing.
For the first nine months of its fiscal year, the company said it had lost $2.2 million on sales of $8.1 million, contrasted with a loss of $1.8 million on sales of $1.9 million in the first nine months of 1989.
Times staff writer Michael Flagg contributed to this report.
