MicroProse near $8 million accord Control would shift to investors

June 09, 1993|By Kim Clark | Kim Clark,Staff Writer

MicroProse Inc. said yesterday that it had reached a tentative agreement that calls for investors to provide at least $8 million in badly needed cash in return for control of the computer game maker.

If the deal goes through, John W. "Wild Bill" Stealey -- MicroProse's colorful founder, majority stockholder, chairman and chief executive -- would be replaced as chief executive and would no longer control the company, the announcement said.

Hunt Valley-based MicroProse declined to identify the prospective investors or elaborate on the statement.

Yesterday's announced proposal, which the company cautioned was not binding, was the first signal that the company might be reaching a resolution of a cash crunch that has been worsening since late last year.

Mr. Stealey, who also owns the Baltimore Spirit indoor soccer team, said earlier this year that the company was suffering financially because managers had allowed game developers to miss important deadlines in 1992, which, in turn, caused the company to ship its games too late for the Christmas selling season.

He also said MicroProse was seeking additional financing.

Mr. Stealey could not be reached late yesterday for comment.

Last week, the company announced it would report an approximately $5 million loss for its fourth quarter, which ended March 31. The company has not yet released its final results for the period.

The company also said at that time that, because of its financial de

terioration, it had violated certain terms of the credit arrangements with its banks.

In its announcement yesterday, the company warned that it "cannot predict whether or when it may successfully complete a financing transaction."

In addition, MicroProse said it is depending on "forbearance and further advances from its lenders for cash to fund current operations." MicroProse said it had reached a "preliminary agreement with its domestic lender to forbear temporarily and to fund certain current operating expenses of the company."

As described in yesterday's announcement, the tentative agreement calls for the investors to buy at least $8 million of subordinated 8 percent notes, which could be convertible into common stock at no more than $3 a share. In addition, the investors would receive warrants for at least an additional 1.33 million shares at no more than $4.50 per share.

The investors would also have the right to nominate a majority of the board of directors.

An industry analyst said late yesterday that the proposed investment was a first step in the revival of the company.

Rod Atamian, a researcher for the San Francisco investment bank of Volpe, Welty & Co., warned, however, that additional financing won't be enough.

"The question is whether they will burn that money up, too," he said. "There needs to be fundamental changes in the way they manage their business," he said, especially as the computer game industry changes from floppy computer disks to compact disks.

"It is apparent the investors aren't happy with Mr. Stealey's performance to date," Mr. Atamian said. MicroProse's stock closed up 75 cents at $6.25 in over-the-counter trading.

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