RB Industries Accepts $46-Million Offer by a Group Led by S.F. Investment Firm

Irvine-based RB Industries, which runs 51 retail furniture showrooms in the West and has had a checkered performance of late, agreed Monday to be bought for $46 million by an investor group formed by the Montgomery Securities investment firm in San Francisco.

Under the definitive agreement, RB shareholders will receive $12 a share as part of a merger into Cahasa Acquisition Corp., a company formed by Montgomery and other investors solely to buy RB.

Among those selling their holdings will be founders Joseph Sinay and his brother, Samuel Sinay, as well as Solomon Lew, an Australian investor who with affiliates holds 34% of the company and who has been trying to gain control of it.

Jack G. Levin, a general partner in Montgomery Securities, said the company will continue as RB Industries. “We don’t anticipate changing the merchandise mix,” he said, adding that the new owners intend to take advantage of RB’s unused manufacturing capacity to make more of the chain’s upholstered furniture to improve profit margins.

James S. Schmitt, an investment analyst at Westcountry Financial in Somis, Ventura County, said that RB is a worthy acquisition target because of its abundant real estate.

The company owns eight stores, has attractive long-term leases on most of the other 43 properties (17 of which are leased from Josam, a partnership controlled by the Sinays) and owns its Irvine headquarters.

It also has about 5,000 square feet of space in Century City that it is leasing at well below current market prices, Schmitt said. Much of the company’s land is in California, where RB has 34 stores.

RB’s board unanimously approved the transaction with Cahasa after Prudential-Bache Capital Funding issued an opinion that the deal was fair to RB shareholders. In July, RB had authorized Prudential-Bache to explore ways to achieve maximum value for shareholders.

Joseph Sinay founded RB in 1950 with a store on Western Avenue in Los Angeles. The company had 10 stores by 1965, when it embarked on a rapid expansion. In the early 1980s, the company entered the Texas market “just at the wrong time,” Schmitt noted. Two years ago, RB retreated from that depressed market, and its earnings have suffered from write-offs on leases there.

The company’s results were also hurt by losses at Cousins Home Furnishings, a San Diego company partly owned for a time by RB.

For the year ended June 30, RB reported a loss of $4.7 million on sales of $99.6 million. RB had a profit of $4 million on $103.6 million in sales the year before. The company said the loss reflected start-up costs for new merchandising and distribution programs and losses related to the sale of its 950,000 shares of Cousins.

In April, RB started an ad program touting its furniture prices as the lowest in town. Under the current setup, RB stores have attached warehouses, but the company recently opened a 260,000-square-foot warehouse in the City of Industry and plans to centralize much of its distribution.

Instead of receiving cash for all their shares, founders Joseph Sinay, RB chairman, president and chief executive, and Samuel Sinay, vice president, have agreed to exchange about 10.8%, or 66,667, of their shares for a new issue of non-voting preferred stock of RB. RB has about 3.8 million common shares outstanding.

Joseph Sinay and Stanley N. Goff, executive vice president and chief operating officer of RB, have employment contracts calling for them to stay with the company until March, 1991, according to Goff.

Levin said that those contracts will be honored but that Cahasa has not had discussions with the two executives about what roles, if any, they would have in managing the business. Samuel Sinay’s contract expires Dec. 1.

Should the agreement with Cahasa not be completed, RB said it has agreed to recommend the election to the board of enough of Lew’s nominees to give him majority control.