N.Y. Engineering, Consulting Firm to Buy Businessland
Businessland Inc. was rescued from the brink of bankruptcy Tuesday when JWP Inc. announced plans to acquire the San Jose-based computer retailer in a deal worth about $52 million.
JWP, a $3-billion engineering and consulting firm based in Purchase, N.Y., described the proposed acquisition as “an excellent strategic fit.”
Businessland, which lost $43 million in its most recent quarter ended March 31, has closed about 30 of its 103 stores the past year and slashed its work force from 4,000 to 2,500 to cut costs.
Earlier this month, the retailer confirmed that its primary lender, ITT Financial Corp., set a June 30 deadline for Businessland to find a buyer or file for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code.
“A merger with JWP best achieves Businessland’s goals and is in the best interests of Businessland’s shareholders, customers and employees,” David A. Norman, Businessland’s chairman, president and chief executive, said in a statement.
Under the agreement, JWP will pay $1.30 cash for 17 million of Businessland’s 30.2 million shares of common stock. The remaining stock will be exchanged for JWP shares. JWP also agreed to pay $250 for each $1,000 face value of $50 million worth of Businessland’s convertible bonds.
Businessland’s board unanimously approved the sale Monday. Shareholders must still vote on the proposal.
JWP, which has about 22,000 employees worldwide, says it is planning to use Businessland’s resources to provide computer equipment to its 40,000 clients around the world.
JWP’s information systems group accounted for 30% of its revenue in 1990, according to James Ryan, investor relations director. Ryan said the group supplies microcomputers to Fortune 1000 companies, Businessland’s primary business.
Norman, who founded Businessland in 1982, has been criticized in recent months for not reacting quickly enough to the changing personal computer market.
Businessland failed to respond to slackening corporate sales, while competitors took advantage of increased sales to home-based and small-business users, said Michael Lundy, an analyst with Hambrecht & Quist in New York.
Lundy said JWP is strong in the corporate computer market and should benefit from Businessland’s distribution system.
“I think they can double their volume in the corporate market by the acquisition of Businessland,” Lundy said.
JWP stock slipped 12.5 cents to $17.875 on the New York Stock Exchange. Businessland stock fell 25 cents to $1.125.
