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Intermark Keeps Wall Street Confused With Its Complex Game Plan

May 01, 1988|GREG JOHNSON | Times Staff Writer

SAN DIEGO — Intermark's recent announcement that its Pier 1 holdings might be sold raises the unusual prospect of the La Jolla-based company dealing away what company executives call their crown jewel, a retail chain that is expected to generate 25% of Intermark's estimated $1 billion in revenue in 1988.

But the possible sale is even more unusual because it and a string of other proposed and recently completed sales would reduce Intermark's annual revenue by an estimated $650 million.

The sale of Pier 1 and Los Angeles-based Continental Graphics, when combined with the completed sale of Simplicity Patterns, would leave as Intermark's largest operating company National Airmotive, an Oakland-based turbine-engine repair company with $90 million in 1987 revenue.

To outside observers, the flurry of divestitures is in keeping with the La Jolla-based mini-conglomerate's unusual and sometimes unfathomable blend of unrelated businesses.

Because of the firm's complexity, only one industry analyst regularly follows Intermark.

"The majority opinion among analysts is that we're just too damn complex," Vice President Mitchell Woodbury acknowledged. Because of Wall Street's disinterest, Intermark executives think their stock is undervalued.

But there is a growing awareness at Intermark's corporate headquarters building in La Jolla that the company needs to spend more time wooing the investment community.

'You Have to Hustle'

Intermark's 24 executives have "been on the move" with acquisitions and divestitures, Woodbury said. "But we're also aware that, over the past 10 years, we haven't actively hustled the industry analysts. It's clear to our board that, if you're going to play in the big leagues . . . you have to hustle and court those people."

Intermark recently hired a New York-based investor relations firm to help it attract investors. Charles R. (Red) Scott, president and chief executive, will spend more of his time "presenting dog and pony shows," Woodbury said.

That could be a tough task because Intermark's eclectic blend of businesses "makes it difficult for analysts to get their arms around the company," according to Irving Katz, director of research for Thomas Green/San Diego Securities. "As a result, you've got to take their word for what's going to happen in a lot of their businesses."

Diverse Holdings

Besides printing, specialty retailing and sewing-pattern design companies, Intermark in recent years has owned all or part of real estate companies, a sporting goods chain, a metal fabrication business, the turbine repair company and garden and nursery chains.

The confusion is exacerbated by the fact that, unlike traditional holding companies that have wholly owned subsidiaries, Intermark typically owns controlling interests in other publicly traded companies.

For example, Intermark, which is traded on the American Stock Exchange, owns only 50% of Pier 1, which is traded on the New York Stock Exchange. Intermark owns as little as 41% and as much as 100% of its nine partner companies.

Deals With Partners

Some of Intermark's businesses--including Simplicity Patterns, which recently was sold for $117.5 million--are held through Intermark's 41%-owned Triton Group subsidiary, which is itself a publicly traded company.

Intermark also has created confusion through fairly complex deals negotiated with its partners: Intermark once sold its Nurseryland garden centers to Pier 1 for more stock in the retail company. Intermark also traded several of its printing operations to Triton, itself a holding company, in exchange for Triton stock.

Analysts also are leery of Intermark's erratic annual earnings, which swing from a net loss to a net profit, depending on whether the company has sold assets during the previous year.

'Can Be Disconcerting'

Intermark has, for example, reported $26.1 million in net profits in three of the past five years--but reported $5.6 million in net losses in the other two years.

"That can be disconcerting to a lot of people," acknowledged Lawrence Klamon, Fuqua Industries president and a member of the boards of Trident Group and Pier 1, Intermark's two most successful companies.

But Intermark executives expect some of that confusion to end when it gets its hands on the cash from the sale of Pier 1 and Continental Graphics.

With those two sales, and already completed deals, Intermark "is looking at the possibility of accumulating a vast amount of cash," Woodbury said. That cash can be used to buy more businesses to propel the company "into the big leagues," he said.

Closer to the Cash

Intermark took a step closer to that pile of cash in February when Triton sold Simplicity for a $40-million gain.

The continuing flurry of activity at Intermark is just part of the acquisitions and divestitures that have occurred at the company since 1970, when Scott became president and chief executive. Since then, Intermark has bought and sold holdings in more than 30 companies, according to Woodbury.

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