IRVINE — Ocean Pacific Sunwear Ltd., once the king of surf apparel, said Thursday that it will be acquired by a San Francisco investment group.
OP, based in Irvine, agreed to be sold by June to Berkeley International Capital Corp., a San Francisco subsidiary of Britain's Govett & Co., a financial services firm.
The deal would be worth about $21 million, according to papers being filed in U.S. Bankruptcy Court in Santa Ana, which has been overseeing OP's operations since May. Also, OP Chairman Jim Jenks would receive a 10-year, $2.6-million consulting contract and a 10% ownership interest in the new company.
OP's owners can reject the deal, however, if they cannot settle a lawsuit filed in March, 1991, by partner Elaine Ornitz, who has the largest stake in the privately held company. Ornitz, widow of the company's former president, is the only owner who objects to the sales agreement, an OP spokesman said.
The proposal, which would probably free the company from bankruptcy court supervision, is to be presented to the court on Feb. 5 for approval.
"We are extremely pleased with the commitment signed with Berkeley and confident that the proposed purchase will strengthen OP's reputation within the industry and among its customers," Jenks said in a statement Thursday.
OP was founded in 1972 as a marketer of surfing trunks that were comfortable and practical--they stayed on even in rough water. Riding its surf-wear reputation, the company went on to promote a whole line of beach apparel.
As the surf wear craze faded in the late 1980s, so did OP's success. Larry Ornitz tried to move the company into manufacturing, but after his sudden death in 1988 the company went back to licensing its famous OP logo, designs and brand names to other manufacturers, rather than making clothes itself. Those companies now sell $150 million in OP apparel annually.
OP has entertained several buyout offers over the years, including one from Berkeley as recently as 1992. All were rejected, usually because financing fell through. Elaine Ornitz contends in her lawsuit that the other owners should have joined her in pushing for a sale of the company earlier, when it was worth more.
Ornitz's lawyer, Bruce Vann in Los Angeles, said Thursday that his client has not received any settlement offer or held any discussions with the prospective buyer about her lawsuit, even though an agreement with her is stipulated as part of the sales agreement. Ornitz owns about 30% of the OP partnership.
"Mrs. Ornitz intends to vigorously pursue her litigation," Vann said.
As a partner, Ornitz would share the proceeds of the sale with the other owners. Under the terms, the owners would share $5 million to be paid over a six-year period. The deal also calls for payments totaling $7.5 million to the company's two secured creditors: Republic Factors Corp. and Wells Fargo Bank, both of Los Angeles. The payments would settle lawsuits filed against OP's owners by Republic and Wells Fargo demanding that they use personal assets to cover the debts.
Unsecured creditors would share $2 million immediately and $4 million payable over two years. The rest, about $2.5 million, would go for post-bankruptcy claims and other payables.
A consulting contract proposed for Jenks specifies that he would receive a $200,000 signing bonus and an annual salary of $240,000 for 10 years. He would also agree to not compete with OP, according to papers being filed with the court.
Jenks, who with his family controls about 27% of the partnership, said he is not clear what role he would play in the new company. It is likely, however, that he would step down as chairman. He said the deal is commendable overall because it would relieve OP of its debt while still leaving a distribution for the partners.
"We did everything we could in a terrible business climate, and the result is we have a lot of debt," he said. "All in all, it's a very fair package for everyone."
The company and its 50 employees would remain in Irvine, said Rick Marshall, a Berkeley vice president. Marshall said his investors were impressed with OP's name recognition in the market, its design team, relationship with licensees and reputation for quality.
Under Berkeley's ownership, he said, OP would make a special effort to increase its international sales.
"Our belief is that it can once again be, on a worldwide basis, the leader in California lifestyle apparel," he said. Berkeley has interests in other surf-wear makers, Marshall said, but would not say which ones.