Schwinn hopes to sell name, most assets in bankruptcy

January 02, 1993|By New York Times News Service

CHICAGO -- After 97 years of family ownership, Schwinn Bicycle Co. plans to ask a federal bankruptcy judge here Tuesday for permission to sell most of its assets, including its name, to the Zell-Chilmark Fund, an investment partnership that specializes in acquiring financially strapped businesses, and Scott U.S.A., a company in Sun Valley, Idaho, that makes ski equipment and bicycles.

The sale would provide Schwinn with nearly $41 million it needs to order its 1993 products from Asian suppliers in time to provide its 1,800 dealers with full inventories for the March-to-May selling season.

Other terms, outlined in papers filed with the court Thursday, could lift the total value of the deal to more than $60 million.

The Schwinn family, which owns the company through a trust fund, will end up with $2.5 million and the contents of the company's bicycle museum in Chicago. But it is expected to lose all influence over the company, and Edward R. Schwinn Jr., the company's chief executive and great-grandson of the founder, Ignaz Schwinn, is not expected to remain in that post, people involved in the bankruptcy say.

The deal would provide them with Schwinn's trademarks, customerlists, contracts, inventory and records.

If Judge Jack B. Schmetterer grants permission for the sale, other bidders would have a chance to top the Zell-Chilmark-Scott offer at a hearing likely to be held later this month, said Arnold H. Dratt, a bankruptcy specialist retained by Schwinn after it filed for bankruptcy protection Oct. 7.

A green light to consider the proposed deal would shorten an auction process that began last month and required sealed bids to be presented to the court Feb. 1.

Schwinn's plight, like the travails of giants like IBM, General Motors Corp. and Sears, Roebuck and Co., drives home the difference between bearing a famous corporate name and boasting a healthy business.

Schwinn has never been the nation's largest bicycle company, and its market share during the 1960s never topped 25 percent. Analysts say its share of the $3.2 billion industry is about 7 percent and falling.

Its fame rests on its leading role in creating a network of independent dealers and trained mechanics around the nation and its longtime dominance through them of the markets for moderately priced and expensive bicycles.

Thus, when baby boomers took to two wheels, a Schwinn was often the bike they dreamed of finding under the Christmas tree or getting as a birthday present.

A 1990 survey by Landor Associates, a market research company in San Francisco, rated the Schwinn name as the best known among American consumers in all of sporting goods and 297th among all businesses, right behind United Air Lines and ahead of Doublemint gum.

"Schwinn still means bicycles to the average person," said Thomas French, who founded Trek Inc., a bicycle maker in Waterloo, Wis., and is now general manager of Cycle Composites Inc., a company in Watsonville, Calif., that makes bicycles with carbon-fiber frames. Schwinn owns a 30 percent stake of Cycle Composites, which would not be included in the proposed deal.

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