CORTLAND, N.Y. -- Smith Corona Corp. will not be heading south after all.
The old-line typewriter company, which had filed for bankruptcy in May for the second time in five years, and signed an asset purchase agreement with Charlotte, N.C.-based Carolina Wholesale Office Machine Co., has made an abrupt reversal of its plans.
A new deal was signed yesterday with Pubco Corp, a Cleveland-based manufacturer of thermal printers and impact printer supplies. The stock purchase agreement between Smith Corona and Pubco, which was an outcome of the overbid process approved as part of Smith Corona's Chapter 11 case, supplants a prior asset purchase agreement with Carolina Wholesale, which would have allowed Carolina to purchase substantially all of Smith Corona's assets.
The bankruptcy court yesterday authorized Smith Corona to pursue the stock purchase agreement, which will be consummated through a Plan of Reorganization.
"The stock purchase agreement with Pubco provides more value to satisfy creditor claims than the Carolina Wholesale asset purchase deal," said Martin D. Wilson, president/CEO of Smith Corona. "In addition, Smith Corona's business will continue to operate under the Smith Corona name with the opportunity to introduce products of the Pubco companies through the Smith Corona distribution channels," Wilson said.
Wilson noted that, in the event Smith Corona cannot obtain approval from its constituencies for the stock purchase plan, Pubco has agreed to convert its stock purchase to an asset purchase.
Under the stock purchase agreement with Pubco, Smith Corona would be reorganized under Chapter 11 and continue to exist as an ongoing entity. Upon completion of Chapter 11 reorganization, Pubco, which is traded on the Nasdaq exchange, would purchase 49 percent of the stock in the reorganized Smith Corona, with the remaining 51 percent of the new common stock to be issued to creditors and, if allowed, to stockholders.
Pubco's cost to purchase the new Smith Corona stock will be determined as a percentage of the value of inventories and receivables at the time of the closing of the agreement, which is anticipated to be by year-end.
The agreement also calls for Smith Corona's current debtor-in-possession financing line with Congress Financial Corp. to be either acquired or replaced by Pubco's Seaside Factors LLC subsidiary.
The current Smith Corona line includes seven models of electronic typewriters and supporting supplies and accessories. To augment the shrinking typewriter market, the company has introduced a number of new products, including inkjet replacement cartridges and commercial headsets.