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Earl Scheib Studies Sale Prospects

Struggling auto paint and body chain hires an investment banking firm to explore options.

May 21, 2003|Josh Friedman | Times Staff Writer

Sherman Oaks-based Earl Scheib Inc., the nation's largest company-owned chain of auto paint and body shops, said Tuesday that it has hired an investment banking firm to consider a possible sale.

The firm, which was founded in 1937 and grew up with America's postwar car culture before struggling financially in recent years, hired Ryan Beck & Co.

"The board will consider any and all proposals and determine what is in the best interests of shareholders," said spokesman David Sunkin. "The marketing process will begin immediately, and the market itself will determine the timing."

Since the death in 1992 of its namesake founder, who helped build the company's brand name by pitching its low-cost paint jobs in late-night TV ads, the stock has languished in the single digits.

The company's thinly traded shares, which rose 3 cents Monday to $1.83 on the American Stock Exchange, peaked at about $19 in 1987. Scheib's stock market value is $8 million.

Longtime shareholder Andrew Shapiro, whose San Francisco-based Lawndale Capital Management owns 12.3% of the company's shares, said he was pleased with Tuesday's announcement, which came after the stock market had closed.

"The board has come to understand what I have felt for a long time -- that the status quo is not acceptable," said Shapiro, the third-largest shareholder after Mario Gabelli's Gamco Investors Inc. and the Scheib estate.

The costs of being a publicly traded company have risen sharply in the last year or so, Shapiro said, "and they are not insignificant when compared with a market capitalization which we feel is grossly undervalued at $8 million."

In the wake of recent corporate scandals, higher costs for accounting, auditing and other services have hit many smaller public companies. Insurance costs have also soared.

The company, which operates 124 shops nationwide, including more than 50 in California, is nearing the end of a restructuring plan, which makes this an "ideal time" to explore a sale, merger or other transaction, Sunkin said.

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