Coelco Ltd., a diversified Fountain Valley company in the midst of an acquisition binge, said Monday that it paid $1.2 million in cash, stock and other considerations for McLean Enterprises, an Anaheim manufacturer and marketer of chrome- and gold-plated spoke automobile wheels.
The purchase marks Coelco's 10th acquisition since July, the sixth since December. In all, Coelco has paid $10 million to assemble a broad array of companies under its corporate umbrella.
President David D. Sterns, who acquired a controlling interest in Coelco last April when the company had no assets or earnings, said Coelco financed the purchases with about $2.5 million in cash and Coelco stock valued by the company at $2.5 million. In addition, Coelco has picked up $5 million in debt from the acquired companies. He said Coelco expects by the end of May to complete five corporate purchases substantially larger than the previous ones.
Cluster of Firms
Coelco's goal, Sterns said, is to bring under a single holding company a cluster of successful entrepreneurial firms involved in the manufacture of building materials or automobile parts or components used in the assembly of recreational and off-road vehicles and mobile homes. Coelco, he said, can offer the fledgling companies financial, legal and other services that will give them greater freedom to expand.
Sterns, former president of Elixir Industries in Gardena, estimated that McLean will generate revenues exceeding $2.5 million in the next 12 months. But Coelco said production cutbacks stemming from quality control problems held McLean's earnings to $120,000 on revenues of $984,000 during the last year. The production glitches have been cleared up, Coelco officials said, and McLean plans to increase its production by about 30% within the next 90 days.
McLean and the other acquisitions under Coelco's belt will earn at least $1.5 million on $35 million in revenue in the next 12 months, Coelco officials predicted.
Since Coelco went public in June, the company has acquired Western States Plywood Corp. in Santa Fe Springs, MME Inc. in San Dimas, Diversified Printing Service in Irvine, Typeset Unlimited in Irvine and a four-story office building in Phoenix.
At the end of November, Coelco announced that it had signed letters of intent to acquire seven more privately held companies in California. In five of the cases, negotiations have led to completed sales, said Carl Cusato, Coelco's executive vice president and chief operating officer.
$8 Million in Debt
The companies that Coelco purchased within the last three months are Synchem Inc., a distributor of chemicals based in Huntington Beach; Laser Images Inc., a Van Nuys producer of laser entertainment; USA Graphics Inc. of Irvine; Impressive Printing Services Inc. of Fountain Valley and Clifford Research & Development Co. Inc., a Huntington Beach manufacturer of automotive engine components and accessories.
Sterns said Coelco has entered negotiations to purchase Kimberley/Way Steel, a Pomona manufacturer of reinforced steel for the construction industry.
In order to raise funds for all its acquisitions, Sterns said, Coelco has incurred $8 million in debt, which, combined with operating debt, brings the company's total indebtedness to $9.5 million.
Sterns said Coelco has relied on "creative financing" to keep up its brisk acquisition pace. He said the company, having raised $2 million by selling convertible debentures, intends to sell another $2 million worth of debentures in the next several weeks. He said the company expects the majority of the debt to be converted to Coelco common stock in the next few months.
Sterns said the company recently acquired a $500,000 credit line from a private investor that will be used to finance additional purchases.