Debt-laden Cardis Corp. said Tuesday that it has entered "serious" negotiations to sell its Tuneup Masters Inc. subsidiary to raise cash to pay its bills.
Cardis, which recently moved its headquarters from Beverly Hills to Buena Park, would not identify potential purchasers or discuss a sales price.
But Blake Childs, an analyst at Bateman Eichler, Hill Richards, estimated that Woodland Hills-based Tuneup Masters could bring $60 million to $70 million. He said such companies as Firestone Tire & Rubber and Ashland Oil are likely suitors.
The quick-fix auto repair shop chain has 232 garages in eight western and southwestern states. The company was purchased by Cardis in September, 1986, from racing executive Andy Granatelli in a cash-and-stock deal valued at $53.4 million. A Cardis spokesman said Tuesday that Tuneup Masters has been consistently profitable and that sales totaled $42 million for the company's 1986 fiscal year, ended last Sept. 30.
$100 Million in Debt
Cardis has retained Bear Stearns & Co. to help restructure its more than $100 million in debt and said the investment banking firm is assisting in negotiations, which could produce the sale of Tuneup Masters in the next 30 to 60 days.
Cardis, the nation's third-largest auto-parts distributor, said it has abandoned previously announced plans to spin off 40% of Tuneup Masters in a public offering. The offering was canceled because Cardis has been unable to obtain an accountant's opinion on its financial statements, spokesman David W. Olson said.
Olson said the company's inability to generate cash from a public offering caused it to postpone payment of some debt and increased its interest expenses. He said interest expenses totaled $19 million for an 18-month period ending April 30.
Cardis has been unable to win further extensions on debt payments to Security Pacific National Bank, its largest creditor, and has a $25-million payment due Oct. 31 and $9 million more due Nov. 30, Olson said. The bulk of the debt is due by Jan. 31, 1988, the company said.
Payable on Demand
Cardis also must meet payment on a $43.5-million loan from Dresdner Bank, a West German institution, by Oct. 23. Cardis borrowed the money from Dresdner to purchase Tuneup Masters. The loan was due last Dec. 31 but was extended and now is payable on demand.
Failure to meet the deadlines could force Cardis into bankruptcy proceedings, but the company denies that bankruptcy is being considered.
Cardis reported losses of $35.5 million and sales of $349.3 million for the 18 months ended April 30. The company said Tuesday that it lost an additional $5.6 million in its first 1988 fiscal quarter, which ended July 31. Sales for the period were $59.2 million.
Tuneup Masters is Cardis' crown jewel and one of its few profitable divisions, according to analyst Childs. It also is the only Cardis property that is readily marketable.
CARDIS AND TUNEUP MASTERS AT A GLANCE
Chairman Jack I. Salzburg and a group of Beverly Hills investors started the company in 1983 by acquiring wholesale distributors of automotive aftermarket products in California, Arizona and Nevada. Cardis buys parts such as fan belts and carburetors at wholesale and resells them to repair shops. The company is California's largest auto-parts distributor and the third largest nationwide. Cardis purchased Tuneup Masters Inc. in September 1986. In reports filed earlier this year, former Tuneup Masters owner Andy Granatelli, was Cardis' largest stockholder, with a 16.7% stake. Cardis moved its headquarters from Beverly Hills to Buena Park this summer.
CARDIS RESULTS (Year ended Oct. 31):
(in millions) 1987* 1985 1984 1983 Revenue $349.3 $130.4 $62.1 -- Net income (loss) ($35.5) 1.1 .9 (.2)
* For 18 months ended April 30. In 1987, the company changed its fiscal year to end April 30.
Employees 2,400Shares outstanding 5.8 million
52-week price range$9.875-$1.875Monday's close (AMEX)$2.25, no change
TUNEUP MASTERS RESULTS (Year ended Sept. 30):
(in millions) 1986 1985 1984 1983 Revenue $52.0 $46.6 $41.1 $41.5 Net Income *$3.3 $2.1 $.42 $2.0
* Nine months ended June 30.