July 26, 2004 – Finance Digest
July 26, 2004
Filed under Features
Edelbrock to go private
The board of directors of the Edelbrock Corporation have approved a request by O. Victor Edelbrock, Jr., the company’s chairman, president and CEO, to acquire all the outstanding shares of common stock of Edelbrock Corporation not already owned by Edelbrock, Jr. and his affiliates.
Edelbrock, Jr. and his affiliates currently own approximately 51.1% of the issued and outstanding common stock of Edelbrock Corporation. The culmination of a deal first floated in April, Edelbrock, Jr. has agreed to offer $16.75 per share in cash, a price which represents a 13.1% premium to the June 25 closing price of $14.81 for Edelbrock Corporation’s common stock and a 23.9% premium over the $13.52 per share posted immediately before the announcement of merger discussions.
The transaction is subject to a condition that Edelbrock, Jr. has sufficient debt financing available at closing as well as other customary conditions set forth in the merger agreement. Edelbrock, Jr. has obtained a commitment, subject to customary conditions, from Bank of America and City National Bank to provide up to $53,000,000 in debt financing for the proposed transaction and working capital purposes.
Following the acquisition, Edelbrock, Jr. and his affiliates expect to own all of the outstanding shares of common stock of Edelbrock Corporation, which will no longer be publicly traded.
“We believe that in the current financial, business, and industry environments, it is in the best interests of the Company to be privately held,” said Edelbrock, Jr. “This transaction will also give the company greater flexibility to make investment and operating decisions based on long-term strategic goals without the concern that a public company must have for the public market’s short-term expectations.”
Edelbrock, Jr. first floated the proposal in April. Thereafter, the board of directors of Edelbrock Corporation formed a Special Committee of independent directors to review the proposed transaction. The Special Committee, consisting of three independent directors of the Company, engaged Skadden, Arps, Slate, Meagher & Flom LLP as its legal counsel and Kerlin Capital Group, LLC as its financial adviser.
Kerlin Capital led the negotiations with Edelbrock, Jr. and his advisers that resulted in the increase in the offer price. Kerlin Capital also rendered its opinion to the Special Committee that the transaction, as currently structured, would be fair to the public shareholders from a financial point of view.
Edelbrock, Jr., was advised by Troy & Gould Professional Corporation and by Banc of America Securities LLC. Edelbrock Corporation was advised by Jones Day. After extended negotiations, the Special Committee voted to approve and recommend the proposed transaction to Edelbrock Corporation’s unaffiliated public stockholders and the proposed transaction was unanimously adopted by Edelbrock Corporation’s Board of Directors.
Founded in 1938, Torrance, Calif.-based Edelbrock Corporation is a premier designer, manufacturer and distributor of performance replacement parts for the automotive and motorcycle aftermarkets. In addition to three production facilities and an automated distribution center, Edelbrock Corporation owns and operates an aluminum foundry and its motorcycle carburetor division in San Jacinto, Calif.
Arctic Cat to Repurchase Shares
The board of directors of Minnesota-based Arctic Cat Inc. authorized the company to repurchase up to $20 million in additional shares of its common stock from time to time in open market transactions. This represents approximately 800,000 shares, or about 4% of the company’s common shares outstanding.
Arctic Cat currently has approximately 150,000 shares remaining under a previous share repurchase program. The company has repurchased more than 9 million common shares since 1996, and has approximately 21 million common and Class B common shares outstanding.
BRP Posts 1Q Loss of $35.7 million
Bombardier Recreational Products Inc. reported a loss of $35.7 million for the first quarter ended April 30. This compared to a net loss of $16.5 million in the same period in fiscal 2004.
The maker of snowmobiles, ATVs, PWC and engines attributed its performance during the past three months to an unrealized foreign exchange loss on long-term debt, non-recurring items related to purchase accounting and increased interest expense on long-term debt.
Company revenue for the first quarter was $630.9 million, 22.3% higher than the $515.8 million posted last year. BRP says the 2004 snowmobile retail season ended in March with increased deliveries in both the North American and European markets, ATV revenues in the first quarter 2004 increased by 47.0% compared to the same period last year, watercraft revenues increased by 35.0%, marine engine revenues increased by 11.0%, and parts and accessories sales increased by 6.5%.
BRP’s disappointing first quarter results follow a less-than-stellar year-end report, released last month.
Revenue for the year ended Jan. 31, 2004, was $2.49 billion, compared with $2.47 billion in the year-earlier period, and profit plunged to $12.7 million from $114.8 million. The manufacturer said the profit decline was primarily the result of a re-evaluation of the assets, liabilities and foreign exchange contracts at the time of the acquisition.
Redline Posts Loss of $8.8 million in ’04
Redline Performance Products, Inc. reported revenues of $10,140 for its fiscal 2004 fourth quarter and year ended March 31, 2004.
Net loss for the fourth quarter of fiscal 2004 was $3.4 million, or $0.69 per diluted share, versus a net loss of $1.5 million, or $1.41 per diluted share, for the fourth quarter of fiscal 2003. The net loss for fiscal 2004 was $8.8 million, or $2.04 per diluted share, versus a net loss of $3.7 million, or $2.96 per diluted share, for fiscal 2003.
Company officials say losses resulted from production delays and higher-than-expected parts costs in the early stages of production. Increased net losses for the fiscal 2004 three-month and twelve-month periods are due, it said, to higher selling, general and administrative expenses (primarily personnel), valuation of inventory and higher research and development costs dealing with the introduction of the 800 Revolt snowmobile.
Interest expense decreased significantly in the fourth quarter of Fiscal 2004 from the prior year’s fourth quarter as a result of the company repaying substantially all of its long- and short-term debt with the proceeds generated from the May 2003 initial public offering.
Since May 2004, Redline has raised $750,000 in a private placement, extended the maturity date of its $2.4 million debt facility, and realigned its senior management team. It also shipped its first 800 Revolt snowmobile.
According to Mark Payne, president and CEO, 53 units have been shipped as of July 1, and the company has orders in hand for approximately 340 more.