Wahlco to Be Acquired by Tennessee Company

Wahlco Environmental Systems Inc. said Monday it agreed to be sold to a Tennessee firm for as much as $3.8 million in cash in hopes that the combination will bolster Wahlco’s flagging fortunes.

The Santa Ana-based builder of air pollution control systems for power plants and other industries will be acquired by Thermatrix Inc., a publicly traded, Knoxville-based pollution control company.

Thermatrix said it will make an initial payment of almost $1.6 million, or 9 cents a share, with payments of as much as $2 million more if certain goals are met.

The deal is expected to be completed next month.

Wahlco was formed as an offshoot of San Diego Gas & Electric Co. in 1990 and became independent in 1995. Wahlco has seen its cash flow dry up in recent years as the market for its products softened.

A Connecticut investment firm, Wexford Management LLC, acquired an 82% stake in Wahlco when the shares were sold by SDG&E; and subsequently pumped millions into the company.

But Wahlco’s fortunes continued falling, a crippling blow coming with the onset of the Asian economic crunch early this year. In July, Wahlco’s shares were bounced from the New York Stock Exchange.

Thermatrix agreed to assume Wahlco’s debts and debt guarantees that had been provided by Wexford. Wahlco declined to disclose the amounts.

Wahlco, which made a number of acquisitions in 1991, has systems installed in more than 1,000 manufacturing and power plants worldwide. The company, which employs 360 people, including 60 in Santa Ana, has manufacturing facilities in the United States and Britain.

Thermatrix made its bid for Wahlco in hopes of forming a combination that would use Wahlco’s established facilities and systems to support Thermatrix’s rapid growth, the Tennessee company’s chairman said in a statement Monday.

Thermatrix shares closed Monday at $3.88, down 13 cents, in light Nasdaq market trading. Wahlco shares, which trade in the thinly followed over-the-counter market, were most recently quoted at 25 cents.

“We are looking forward to restoring Wahlco’s strong brand name . . . by aggressive marketing, improving service and competitive pricing,” Thermatrix Chairman John Schofield said.