Investment Group to Acquire Earl Scheib
Earl Scheib Inc., the auto-painting chain whose low-priced specials turned the company into a Southern California cultural icon, agreed Thursday to be sold to an investment group for $17 million.
Sherman Oaks-based Scheib has struggled for years to be profitable in part because the paint on new cars typically lasts a decade or more, dramatically reducing the market for car repainting.
Scheib shareholders will be paid $3.43 a share by Elden Holding Group. That represents a hefty premium over Scheib’s Thursday closing price of $2.70 a share, up 10 cents, on the American Stock Exchange and reflects the value of its real estate rather than its painting business.
In addition to the $15-million cash payment to shareholders, Elden Holding, a privately owned real estate investment company that also is located in Sherman Oaks, said it would have $2 million in acquisition-related costs.
Cary Lefton, a managing member of Elden, said it planned to continue operating Scheib as an automotive paint chain and would retain the familiar name.
Scheib has about 800 employees, and Lefton said there were no plans for widespread layoffs.
He said that as a privately held company with new capital, Scheib could finally implement a restructuring plan put in place three years ago but stalled because of a lack of cash.
A key part of the plan, Lefton said, is to reevaluate Scheib’s 110 shops -- about half of them are in California -- to make sure they’re concentrated in the Sunbelt states, where cars last longer and therefore are more likely to require repainting.
One of the new owner’s first moves will be “to implement a campaign to improve perception of the brand” from its current image as a purveyor of low-cost and short-lived auto repainting services, he said.
Earl A. Scheib, who started the company in 1937, was convinced that Southern Californians would welcome an affordable way to spiff up their much-loved vehicles. This was about a decade after Henry Ford stopped selling cars painted only in black.
The gravel-voiced, folksy Scheib haunted local late-night TV in the 1950s and ‘60s with ads in which he promised to “paint any car, any color, for $29.95.”
Scheib died in 1992. Since then, the company has had trouble distinguishing itself in the highly fragmented automotive appearance market. The company tried to broaden its sales by doing minor body repairs and opening a shop to paint large trucks, tractors and buses.
Today, Scheib’s prices range from a $199.95 for an entry-level paint job to $500 for its top-of-the-line package. But many consumers seeking to change the look of their vehicles, especially in car-crazed Southern California, seek out high-end shops for custom repainting that can cost $1,000 and up.
Lefton said he and partner Michael Bollenbacher were hands-on managers of the commercial real estate ventures Elden Holding has acquired since the firm was founded in 1986. Its $180-million portfolio includes apartment buildings, shopping centers and business parks in California and Hawaii.
Scheib’s management team has asked to stay on. Lefton acknowledged that Elden has no skills in paint shop operations and said the request would be considered.
David Sunkin, Scheib’s vice president and general counsel, said the deal was the result of nearly seven months of negotiations. Scheib hired an investment banker a year ago and put the company up for sale.
Most of the stock is held by three large investment groups, including the Scheib estate.
Scheib has posted some modest profit in recent years. But since 1994, it has lost $12.5 million, including $1.9 million on sales of $47.2 million in 2003.
