“But wait there’s more.”
The line made famous by Ronco Corp.’s infomercials also describes the aftermath of the company’s bankruptcy proceedings.
The Simi Valley-based Ronco on Aug 1 sold all its assets to Marlin Equity Partners, a private investment firm in El Segundo, for $6.5 million in a bankruptcy auction. Just two years ago, the Houston firm Sanders Morris Harris paid more than eight times that amount.
“Marlin got a good deal for $6.5 million, but there will be questions about why Ronco devalued from $55 million in two years,” said Richard Allen, former chief executive at Ronco and the largest unsecured creditor in the bankruptcy.
“This is going to go on for years,” Allen declared. “You’re going to see quite a few actions, if not class actions, against Ronco.”
In its approval of the sale, the U.S. Bankruptcy Court ordered an investigation into credit card fraud at Ronco, based on allegations by Allen and other former executives. Allen has alleged that the management team that replaced him charged customers for products, then didn’t ship the products or return the money for months, instead using the money to prop up Ronco’s failing finances.
The court fired Chief Financial Officer Ronald Stone and Chief Operating Officer Paul Kabashima effective Aug. 3. In previous papers filed with the court, Allen accused Stone of organizing the credit card fraud, and he stated that both Stone and Kabashima misled investors and the Securities and Exchange Commission with false quarterly filings.
John Rieland, a financial analyst at Sanders Morris Harris who serves as Ronco’s chief executive officer, will continue to lead the company.
Upon taking ownership, Marlin will reduce payroll to a maximum 25 employees, down from 110 at the beginning of the year. Also, Ronco will reduce its real estate footprint but remain headquartered in the same building.
“It’s an operational turnaround,” said George Kase, a principal at Marlin with expertise in retail and consumer marketing. “We plan on turning back to television and turning the company back to the way Ron Popeil ran it.”
Popiel founded Ronco in 1958 to sell his inventions, and the company’s best-sellers remain Popiel products, including the Pocket Fisherman, Veg-O-Matic and Showtime Rotisserie.
Kase plans to make the Popeil catalogue the foundation of the company. For new products, he plans to be “opportunistic,” selling products from other companies or even acquiring manufacturers with products that could take off with the Ronco marketing strategy. Kase expects to have new products on the market by 2008.
As for timing, “we plan on hitting the ground running and having a great fourth quarter,” said Kase, who explained that the holiday season accounts for a disproportionate share of sales in direct marketing. “We think there are real products, real brands, and we look to turn it around pretty quickly.”
But Jefferson Nunn, Ronco’s former chief information officer, writes on his Web site that “rebuilding bridges with suppliers and advertisers is going to cost far more than what Marlin envisions. Whatever bill of goods the current Ronco executives have sold Marlin will not have real business value.”
Kase said he spent a week before the purchase negotiating with warehouses and has reached settlements with all. He noted that no objections were raised in court to Marlin’s takeover.
Even Allen supported the Marlin buyout, even though it meant he and other unsecured creditors would get nothing for their claims of $32.4 million. In retrospect, he sees Ronco’s fall as “a lesson for every company, and they should watch this bankruptcy for the tell-tale signs of financial trouble.”
Calls to Rieland were not returned and Popiel declined to comment on the bankruptcy.
