Packard Bell Delays Stock Offering : Chatsworth: The firm blames a weak market. Others cite the company’s high debt load.
Packard Bell Electronics Inc., the largest independent supplier of IBM-compatible personal computers in the United States last year, has postponed its $70-million initial public stock offering.
Shares of the Chatsworth company were initially scheduled to begin trading last Thursday with proceeds from the offering to be used to pay debt and for working capital. Bob Harris, a Packard Bell spokesman, blamed a weak market for IPOs for the postponement. He said the company still hopes to go public, but has not yet rescheduled the offering.
Until then, Harris said, “financing is in place to assure the ongoing operations of the company. It’s business as usual.”
Packard Bell Chairman Beny Alagem did not return phone calls.
Market watchers said that if Packard Bell’s offering of 5.2 million shares had proceeded last week, the stock would have sold well below the company’s target price of $13.50 to $15.50 per share.
Some suggested that uneasiness over the company’s finances might also have led Packard Bell and underwriters Smith Barney, Harris Upham & Co. and Lehman Bros. to pull the plug on the offering.
Other offerings have gone forward since the IPO market began to soften a few months ago, said Bob Mescal, an analyst at the Institute for Econometric Research in Ft. Lauderdale, Fla., which tracks new issues. “If the market conditions were satisfactory for those offerings, why weren’t they satisfactory for Packard Bell?” he asked.
Keith Goggin, a reporter for the newsletter Going Public: The IPO Reporter, said, “The high debt level was the main concern” of analysts and investors.
Goggin was also skeptical about the offering’s chances of going forward at a later date. “It’s a tainted deal,” he said. “The more they postpone it, the less people are going to like it.”
Since Packard Bell announced in March its plans to go public, concerns have been voiced over the company’s debt, as well as its heavy losses and industrywide price cutting. Analysts and potential investors have also questioned the company’s close ties to Cal Circuit Abco, a computer distributor owned by Alagem and Packard Bell directors Jason Barzilay and Alex Sandel.
Alagem and his partners formed Packard Bell in 1986 after buying the company name--long associated with radios and television sets--from Teledyne Inc.
It grew rapidly by selling its low-priced personal computers through Sears, Roebuck & Co., Wal-Mart and other mass-market merchants, but has encountered increased competition lately from rival IBM-clone makers seeking to expand their presence in that market.
According to documents filed with the Securities and Exchange Commission, Packard Bell lost $798,000 in 1991.
Although its gross sales totaled $819.5 million, a high level of returns and allowances--which include equipment returned by consumers and retailers--reduced net sales to $675.9 million.
Its debt totaled $93.3 million, and as of Dec. 31 the company had a negative net worth of $4 million, meaning its debts exceeded its assets by that amount.
Up to $7 million of the offering’s proceeds were to be used to repay debt to Cal Circuit Abco.
Also last week, Packard Bell said that its director of marketing, Dennis Cox, had resigned.
Cox joined rival PC-maker AST Research Inc. in Irvine as director and general manager of consumer products.
