Packard Bell to Go Public With Sale of 5.2 Million Shares

Packard Bell Electronics Inc., which shipped more IBM-compatible personal computers in the United States in 1991 than any company besides IBM, is going public.

The Chatsworth company plans to sell 5.2 million shares of common stock at between $13.50 and $15.50 a share, and after expenses it hopes to raise about $70 million. The money will be used to pay debt and for working capital, according to documents filed with the Securities and Exchange Commission.

Packard Bell’s rapid growth has been attributed to its strategy of selling its low-priced, easy-to-use PCs through mass merchants such as Sears and Wal-Mart, electronics retailers such as Circuit City and discounters such as Price Club.

After the offering, Beny Alagem, Packard Bell’s chairman, president and chief executive, will own 23.6% of the company’s stock, as will Packard Bell directors Jason Barzilay and Alex Sandel.

Alagem, Barzilay and Sandel founded the company in 1986 after purchasing the Packard Bell name--long associated with radios and television sets--from Teledyne Inc. for an undisclosed price. As a pioneer of the concept that computers can be sold much like commodities by mass merchants, Packard Bell quickly rose through the ranks of PC clone makers.

From 1988 through 1991, Packard Bell’s net sales surged from $187.9 million to $675.9 million. Last year it shipped 420,000 IBM-compatible PCs in the United States, more than Compaq Computer and Tandy, and second only to IBM, according to International Data Corp., a Framingham, Mass., market research firm.

But the SEC documents also reveal that Packard Bell’s profits have been erratic. The company rebounded in 1990 to a profit of $8.5 million after a 1989 loss of $19.3 million. But in 1991--a year when the personal computer industry was battered by the economic recession, flattening demand and price wars--Packard Bell lost $798,000. It said it also expects to report a loss in its first quarter ending March 31.

The company’s total debt as of Dec. 31 was $93.3 million, and it had a negative net worth--roughly equal to total assets minus total liabilities--of $4 million. It also had a working capital deficit of $10.1 million as of Dec. 31, meaning it had a shortage of funds needed to finance the business until receiving payment for its products.

After the stock offering, Packard Bell estimated that its debt would be reduced to $23.9 million and it would have working capital of $59.2 million. The company warned, however, that after this year it will probably have to raise additional funds through equity or debt offerings.

Packard Bell said it plans to continue focusing on sales to mass merchants. It also said it intends to put more effort into expanding its sales in Europe. International sales--mostly in Europe--accounted for 8.6% of Packard Bell’s 1991 net sales. The company recently began assembly operations in the Netherlands and opened sales offices in Britain, France and Germany.

The company has also been trying to increase its sales by introducing new products. Last fall, Packard Bell debuted its first local area network--a group of computers that share information. The company hopes that the new networks, which are essentially ready to hook up and operate right out of a box, will appeal to small businesses that don’t need customized networks.