Investors pleased with buyout deal


June 18, 1993|By Kim Clark | Kim Clark,Staff Writer

A week after an earlier takeover proposal fell through, MicroProse Inc. reached another tentative buyout agreement yesterday. This time, unlike the previous offer, investors greeted the offer with enthusiasm and said there was a good chance it would succeed.

The Hunt Valley-based maker of computer games said it accepted a proposal to merge with Spectrum HoloByte Inc., a small Alameda, Calif.-based game maker with big corporate backers. If the merger is completed, MicroProse's headquarters will move to California, and the company's co-founder, John W. "Wild Bill" Stealey, will be replaced as president and chief executive, MicroProse said yesterday.

This was the second takeover proposal that financially troubled MicroProse has announced in two weeks. On June 8, MicroProse announced a deal in which a group of unnamed investors would have paid $13 million for control of the company. But that agreement, which analysts said was too generous for the investors, fell through two days later.

Yesterday's announcement was hailed by investors, who noted that Spectrum -- maker of such popular games as Tetris and the flight simulator Falcon -- is a well-run company.

"This has a lot more plausibility than the last one," said Harris Leviton, who manages FMR's Fidelity Retirement Growth Fund, one of MicroProse's largest outside stockholders.

"Anyone who buys in" to MicroProse "has got to fix it," he said, referring to the company's announcement last month that it had lost about $5 million in the fiscal year that ended March 31, on sales of $46.5 million.

"The biggest positive in the whole deal is the people they [Spectrum] bring in," Mr. Leviton said.

Spectrum is run by some veteran toy industry executives, such as Chief Executive Patrick S. Feely, formerly president of Tonka Toy Products, Mr. Leviton said.

Mr. Leviton said he likes the Spectrum deal but that he would withhold his endorsement until Spectrum releases more financial information about the offer.

Although Spectrum reportedly had sales of only about $14 million in 1992 and has only about 150 employees (about half the number at MicroProse), it can afford the takeover because it is backed by groups such as AT&T Ventures and Paramount Communications.

Other investors also seemed to be encouraged by yesterday's proposal. MicroProse's stock rose $1 in over-the-counter trading, closing the day at $6 a share.

People within the company also appeared to accept the deal as a fait accompli.

In a telephone interview, Mr. Stealey said he left the office early yesterday to play golf. "I am practicing my retirement," he said.

Though he would lose control of day-to-day operations, Mr. Stealey, who owns a majority of the company's shares, said he expects to be the largest stockholder in the new company, which would keep the name MicroProse.

MicroProse officials said they expect the new company to maintain operations in Maryland.

Mr. Stealey said he thinks the merged company could quickly double in size.

"We have great people, distribution and products. We stumbled a little last year, partly because we had convinced ourselves we were so great we could do lots of great products," Mr. Stealey said.

Mr. Stealey said he likes the Spectrum deal partly because he is friendly with the company's chairman and founder, Gilman Louie.

He noted that MicroProse had bailed out Spectrum, which had been part of publisher Robert Maxwell's empire, in late 1992, when Mr. Maxwell drowned and left his businesses in disarray. MicroProse advanced cash to its competitor to keep it operating, Mr. Stealey said.

Mr. Stealey said he feels a little sad to lose control of the company he had helped create, but he said the deal is best for MicroProse and for him.

"It was almost more fun starting the business than running it. We used to have a sales vice president who, every time we got a sale, would come out of his office and do a jig. Now we don't do jigs when we get sales," Mr. Stealey said. "I will miss the neat camaraderie" at the office.

Mr. Stealey, 45, added that as soon as he is freed from day-to-day responsibilities at MicroProse, he will turn his attention to the Baltimore Spirit indoor soccer team, which he bought last year. "I've got to make sure the Spirit makes some money," he said.

Focusing on what's needed

MicroProse's other founder, Sid Meier, also praised the deal yesterday. Mr. Meier, who has created some of the company's most famous games and would remain as a game developer for at least a year, said the impending resolution of the company's financial troubles "lets us focus on what we need to do."

And merging with Spectrum would be good because it would link MicroProse with a company that is in the lead in the development of "virtual reality" products, he said.

Mr. Meier, who sold his interest in MicroProse several years ago, said he doesn't feel bad about the prospect of the founders' being moved aside.

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