Intermark to Sell Big Chunk of Pier 1
Under increasing pressure from banks to pay off loans, Intermark said it plans to sell a chunk of its 52% stake in Pier 1 Imports in a public stock sale, a deal that could raise more than $60 million.
Intermark, a La Jolla-based holding company with majority or substantial ownership stakes in nine “partner” companies including Pier 1 Imports of Ft. Worth, has been hit hard in recent months by losses and its own falling stock price.
As recently as three weeks ago, Intermark Chairman Charles R. Scott denied rumors that Pier 1Imports, which he described as his “crown jewel,” was being sold. Although other of its partner companies have suffered recently, Pier 1 Imports was a valued source of sales and earnings growth for Intermark.
On Thursday, Chief Financial Officer James Iaco said the company decided to sell the Pier 1 Imports shares because the company needs to raise cash to pay a $27-million loan that is now due. Other Intermark loans are due at the end of this year, he said.
Asked what had changed in the three weeks since Scott denied Pier 1 Imports was being sold, Vernon Lo Forti, Intermark’s vice president, said, “The banks are playing more hardball than they were before.” Lo Forti added that some of Intermark’s lenders had agreed to extend due dates of loans for some months.
Lo Forti denied that Intermark is in serious financial trouble, saying the sale of Pier 1 Imports was part of Intermark’s plan to sell assets to reduce debt. He conceded however that the sale is “bad news from the standpoint that we are selling before we’d like to sell.”
Scott recently relocated to Atlanta to assume closer control of troubled Fuqua Industries, a company in which Intermark owns a 26% stake. The company has been trying unsuccessfully to sell its 98% ownership stake in National Airmotive, an Oakland-based concern. Scott was unavailable for comment Thursday.
Intermark said it will sell 9 million of the 12.5 million Pier 1 Imports common shares it owns in the offering. Pier 1 Imports’ closing stock price on Thursday was $7.125, down 75 cents for the day in New York Stock Exchange trading. At that price, the offering would raise about $63 million in gross proceeds.
The 12.5 million of Pier 1 Imports common shares represent about 35% of the total outstanding. Intermark also owns preferred stock in Pier 1 Imports that gives it a 52% voting control of the company, a fast-growing, 600-store retail chain specializing in home furnishings and accessories.
Intermark stock closed unchanged at $2.875 per share in New York Stock Exchange trading Thursday. Its stock has been depressed by growing losses, which totaled $33.6 million on revenue of $1.1 billion for the nine months ended Dec. 31.
The stock sale will leave Intermark a much shrunken company from a revenue and earnings perspective. Last year, Intermark’s 52% control of the company allowed it to include all of Pier 1 Imports’ $516 million in sales and 35% of its $25.5 million in net income on its own sales and earnings statement, using the consolidation accounting method.
Once the stock sale is complete, Pier 1 Imports’ revenues will be dropped from Intermark’s earnings statement. The company will be able to claim 10% of Pier 1 Imports’ net income, Lo Forti said.
For the fiscal year ended March 31, 1990, Intermark posted a $10.7 million loss on $945.5 million in revenue.
One analyst who asked not to be named expressed surprise that Intermark is selling the stock to the public instead of in a privately brokered deal, which might bring Intermark a higher price. Intermark’s reaction was that the company’s goal is to “disperse” the stock through the public offering.