SAN DIEGO — Clothing supplier Beeba's Creations Inc. of San Diego is selling 20% of its stock to J.C. Penney Co. of New York for $19.2 million as a prelude to the two companies' joining forces to set up a new ladies' specialty clothing operation.
The 1,025,995 newly issued Beeba's shares will be sold to Penney for $18.75 apiece, above the market price for Beeba's stock before the deal was announced Wednesday. Beeba's Creations stock closed up $2.25, at $17.75 per share, in over-the-counter trading Wednesday. The stock sale will be final in 30 to 45 days, said Beeba's chief financial officer, Thomas Baumann.
According to its agreement with Penney, Beeba's will supply 50% to 60% of the private-label clothing for an as-yet-unnamed ladies' wear specialty store chain to open inside 100 existing Penney stores beginning in early 1988.
Penney may follow those stores later with stand-alone stores featuring the same private-label goods, according to a Penney statement. Beeba's is not required to contribute capital to the new operation.
Neither company said specifically what kind of clothing will be sold in the stores, saying only that it would be "fashion-oriented, junior sportswear for ladies with disposable income," Baumann said.
The Penney stores may generate as much as $25 million in extra revenue for Beeba's in the stores' first full year of operations in fiscal 1989 and about $12 million for the fiscal year ending in August, 1988, Baumann said. Penney is already a big customer of Beeba's, accounting for 10% of the company's $94 million in revenue last year, Baumann said.
Beeba's largest customer is the Limited Inc., a specialty-clothing retailer based in Columbus, Ohio, that last year bought 21% of Beeba's products. Beeba's imports ladies' clothing, often made to order for such big retailer customers as Penney and the Limited, from more than a dozen countries, Baumann said.
While praising the deal as generally good for Beeba's shareholders, San Diego Securities stock analyst Irving Katz said a potential casualty of the Penney deal could be Beeba's good relationship with the Limited.
Baumann said he foresaw no problem with the Limited as long as "we supply merchandise on time and in quantities they require."
Barry Sahgal, a stock analyst with Ladenburg, Thalmann & Co. in New York, said Penney's investment is a "strong reinforcement of Beeba's future growth potential and a feather in the cap of management that has been able to conclude a transaction at a premium to the market price of Beeba's stock."
Sahgal's firm underwrote Beeba's initial public stock offering in September, 1985.
Despite the jump in the price of Beeba's stock Wednesday, its shares are still selling below that of Beeba's secondary stock offering in May, which sold at $18.125 per share. In Beeba's initial public stock offering, shares sold at $8.25.
Also, Beeba's reported lower earnings on slightly higher sales for its second quarter ended Feb. 28. The company reported net income of $802,228 on sales of $21.5 million, compared to net income of $933,449 on sales of $21.2 million over the same quarter last year.