The Century City-based specialty investment bank Houlihan Lokey Howard & Zukin is slated this week to announce an acquisition of Beverly Hills-based Chelsea Capital Corp., a boutique investment bank headed by David Herman.
Chelsea is known for work in selling family-owned businesses in which founders are getting into their retirement years.
The “World War II generation” is how Herman has described many who started businesses in Southern California after the war. Many of those companies boomed along with the spectacular growth of the region, and even the world economy.
The extra-heavy action in mergers and acquisitions work propelled this merger of bankers, HLHZ said. “Our deal flow is getting so heavy, we just need to add some people on,” said an HLHZ spokesman.
Spin an IPO?
Woodland Hills-based magnetic bearing manufacturer Avcon Inc. last week hired on veteran executive William Lennartz as chief executive, with primary duties to line up venture capital. The venture cash will sustain the company to a possible initial public offering (IPO), or merger with larger public company.
Last week, Lennartz, 56, said he is looking for venture capital for the next few years, while ramping sales up to $20 million, from the current $4 million level.
Lennartz is taking equity in Avcon, a maker of bearings that use magnetic repulsion to eliminate friction.
Avcon is the brainchild of Crawford Meeks, 66, who stays on at Avcon as “Chief Technical Officer.”
Meeks’ title may remind readers of the old “Star Trek” television series character Mr. Spock, who was referred to as the “chief science officer.”
Avcon does get involved in some high-tech work: for example, it supplied a magnetic bearing to the University of Texas for use on a flywheel-powered bus.
While magnetic bearings have many prosaic uses in industry, one dramatic application in the future may be on flywheels (kinetic energy storage devices), which some posit will help power pollution-free vehicles in the future.
Dealmaker
Once again Fred Roberts, Westside investment banker, has been tapped to “enhance shareholder value” at a local publicly traded company this time, it’s the Sherman Oaks-based House of Fabrics Inc., the cloth retailer.
Roberts, president of F.M. Roberts & Co. Inc., last week said he will look for either “buying or selling” opportunities for House of Fabrics.
The betting is that Roberts will sell. That’s what he has done in his last three deals, which included Seda Speciality Packaging Inc., a plastic bottle maker. That company had a market capitalization (shares outstanding times price) of $70 million when Roberts signed on, and $180 million when Roberts arranged a sale.
But House of Fabrics CEO Don Richey said last week he would prefer to build up House of Fabrics, possibly through acquisition of other ailing cloth retailers. “That’s what I’ve been, a turnaround guy. Though, I guess if we get a bid we can’t refuse, then we sell,” he said.
Though House of Fabrics curtailed operations as part of a bankruptcy reorganization plan that was completed in July 1996, the retailer is still a big operation, with 262 outlets in 27 states.
It reported a net loss of $4.4 million on revenues of $54.1 in the latest reported quarter, compared with a loss $6.0 million on revenues of $56.5 million in the year earlier period.
Last week, Richey joked that he may try to pay Roberts’ fees, which he regarded as substantial, “in cloth.”
For his part, Roberts said he is considering having all of his furniture re-covered.
Jefferies raises cash
Even securities brokerages need to raise money for themselves, that is as evidenced by Westside-based Jefferies & Co. Inc.’s successful issuance of unregistered $100 million in 7.5 percent bonds in mid-August.
The bonds will help finance an expansion of Jefferies operations, Frank Baxter, chairman and chief executive of the 35-year-old Jefferies, said in a statement.
Major institutions bought the privately placed notes, the statement said.
The bond sale highlights Jefferies’ growing investment banking operations the company has come a long way from its roots as an off-exchange trader of huge blocks of stock for institutions.
The company was founded by Boyd Jefferies, widely considered a super trader who worked exceedingly long hours, but who fell in the stock-parking scandal surrounding arbitrageur Ivan Boesky and Drexel Burnham Lambert.
Today, Jefferies itself a publicly traded company has more than 1,000 professionals on board worldwide, a very active high-yield bond underwriting and trading operation, and burgeoning equity desk under the tutelage of Chris Kanoff, executive vice president. (He’s also husband of Mary Ellen Kanoff, top-flight securities lawyer with Latham & Watkins in downtown Los Angeles.)
Appropriately, Jefferies itself would have made a great investment in recent time. The stock started out the year 1995 at $16 a share, and traded last week in the $63 a share range.
Jefferies insiders own about 24 percent of the stock, and an employee stock ownership plan holds about 12.6 percent of the stock, according to latest SEC filings. That makes a hostile takeover very difficult.
By the way, with 914,907 shares owned, chief Baxter has about $58 million worth of Jefferies stock under his belt, at last week’s prices.
Senior reporter Benjamin Mark Cole covers the investment community for the Los Angeles Business Journal
