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Initial public offerings are rare commodities in South Florida, but companies going the other way abound. A number of public companies are stepping back into the private market through insider buyouts, including BCT International, Ecometry Corp. and Interfoods of America Inc. And more so-called “reverse IPOs” are in the works. Within the past nine months, at least two other Florida companies have announced plans to go private, according to documents filed with the Securities and Exchange Commission. Other local deals are in the pipeline, said Scott Salpeter, a managing director at Capitalink, a Miami-based investment banking firm. He declined to name the companies. Many small companies that went public during the IPO boom of the 1990s are now having second thoughts about the expense and regulatory duties required of public companies, according to local investment bankers. Life as a public company is not cheap. It costs an extra $100,000 to $250,000 a year to meet public filing requirements, Salpeter said. Those costs include at least $50,000 a year for lawyers to scrutinize quarterly and annual filings, SEC filing fees and costs associated with audits, printing of financial documents and investor relations/stock promotion. Faced with a dearth of Wall Street interest, smaller public companies in South Florida and elsewhere often fail to attract a following. That’s the case with Delray Beach, Fla.-based software developer Ecometry Corp. “It is clear that the public markets do not view our sector favorably, and given the current economic climate, it is unlikely that this situation will improve in the near term,” said Wilburn Smith, company chairman and co-founder in a prepared statement. Smith and Allan J. Gardner, co-founder and chief technology officer of Ecometry, have offered to buy out other stockholders for $2.70 a share, an 80 percent premium over the pre-buyout announcement price. The founders already own about 35 percent of the common stock. By going private the founders and the management team will be able to “focus efforts on long-term strategic initiatives rather than the quarter-to-quarter results that Wall Street demands,” said Gardner in a released statement. To be sure, lackluster earnings, heavy debt loads and large compensation packages for corporate insiders can also repel stock investors. “Sometimes there is a good reason why there are orphan public companies,” said Salpeter. Companies that have previously disappointed Wall Street with poor earnings or carry a heavy debt load or lack short-term growth are typically abandoned by Wall Street, he said. Those factors, in turn, produce a stock that lacks liquidity, which further diminishes the company’s lure for investors. “No liquidity leads to no following. No following leads to no liquidity. It’s a vicious circle,” says Bruce Foerster, managing director of South Beach Capital Markets, a Miami-based investment banking firm. “South Florida has a lot of research orphans.” On that basis, Foerster expects more South Florida companies to lower their public profile through buyouts led by management or corporate insiders. Faced with a depressed stock value, corporate insiders believe their own stock represents a bargain and may opt to buy up their own company rather than sell to a third-party at a low price. “They can buy themselves for less than they think they’re worth,” said Salpeter. “We have seen a lot of going-private activity.” The firm is actively working on two local reverse IPOs announced late last year. On Dec. 24, Miami-based Interfoods of America said it had reached a definitive agreement under which top executives will take the company private. Likewise, on Nov. 26, the board of directors of Fort Lauderdale, Fla.’s BCT International approved a buyout by a company owner William Wilkerson, its chairman and chief executive. Wilkerson now owns about 53 percent of BCT, a holding company that operates Business Cards Tomorrow. With 84 franchises in the U.S, Canada and Argentina, BCT claims to operate the world’s largest wholesale printing chain. The stock trades on the OTC Bulletin Board. Under the buyout agreement, an acquisition group called Phoenix Group of Florida, which is owned by Wilkerson, will buy BCT shares. His group is offering other shareholders $1.13 a share, a 50 percent premium over the pre-buyout price tag. Capitalink represents the special committee of the company’s board that accepted the deal on Nov. 26, 2001. The board had rejected a previous offer in November of 2000. Steven Bronson, a major shareholder, had offered $2.50 a share. The stock, which was previously listed on Nasdaq’s National Market, has languished over the last year. But in late August, Nasdaq officials moved to delist BCT shares because of the company’s failure to meet Nasdaq trading requirements. On Aug. 31, Nasdaq officials noted that the stock had failed to meet a minimum bid requirement of $1 per share for 30 consecutive days. Nor did the company meet Nasdaq’s minimum market value of $5 million for 10 consecutive days. The shares were delisted at the start of trading Sept. 10. Although Wall Street has been cool, Wilkerson has been actively buying his company’s shares. On Sept. 1, he purchased 288,858 BCT shares for 90 cents, compared with a mid-September price of 57 cents. Over the past year, the company’s once robust financial performance has faltered. For the six-month period that ended on Aug. 31, the company had earnings of $276,000, down from $842,000 in profit for the same period in 2000. Wilkerson was traveling and unavailable for comment. Meanwhile, Interfoods of America is also going private in a buyout led by CEO Robert S. Berg and Steven Wemple, the president. The buyout team is offering shareholders unsecured subordinated notes equivalent to $1.45 a share, up from their first offer of $1.20 per share made on Oct. 21. Prior to the offering, the stock was trading at 56 cents a share. Those shares also trade on the OTC Bulletin Board. Interfoods of America is a franchisee and operator of 165 Popeye’s fast food restaurants in Florida, Alabama, Illinois, Georgia, Mississippi, Louisiana and Missouri. Once again, the company may be a victim of its own financial statements, failing to attract much of a following due to a heavy debt load. During the last few years, Interfoods has grown aggressively through acquisitions funded largely by debt. The company has typically purchased troubled franchises and tried to turn them around. As of Sept. 30, Interfoods had $97.8 million in debt, which is secured by all of the company’s assets. The new private company will assume the debt. “Their debt level is excessive compared to peer groups’,” said Salpeter from Capitalink. What’s more, insiders enjoy large salaries. For the last fiscal year, Berg earned a salary of $768,043. Wemple earned $718,326, according to documents filed with the SEC. Capitalink also represented the special committee to review the transaction. That committee included Berg, Wemple and Marshal E. Rosenberg, president of a privately held insurance and financial services company. As an agent for National Life Insurance Co., Rosenberg has sold life insurance policies to the company. Interfoods officials could not be reached for comment. Other Florida companies that have announced plans to go private include Deltona Corp. in Ocala. In April, Boca Raton, Fla.-based Concorde Assets Group announced a management-led buyout.

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