RCL ACQUISITION CORP. SIGNS LETTER OF INTENT TO MERGE WITH HRM HOLDINGS CORP., THE PARENT OF HAUPPAUGE RECORD MANUFACTURING, LTD.
NEW YORK, Feb. 17 /PRNewswire/ -- RCL Acquisition Corp. (NASDAQ:RCLA) announced today that it has executed a letter of intent to merge with HRM Holdings Corp., which, through its wholly owned subsidiary, Hauppauge Record Manufacturing Ltd., is a leading manufacturer and duplicator of audio and video cassette tapes. HRM supplies prerecorded music and home entertainment products to a broad range of major entertainment companies in the United States. The letter of intent contemplates that, upon the merger of HRM with RCL, the stockholders of HRM will receive an aggregate of 4,000,000 shares of RCL common stock. The combined company will be named Hauppauge Manufacturing Group, Inc. and will be located at HRM's headquarters in Hauppauge, New York. RCL presently expects to use its approximately $6.8 million of cash to pay down part of HRM's debt (which now consists of 14 percent subordinated indebtedness and senior revolving indebtedness) and to pay expenses related to the proposed transaction. This transaction will facilitate HRM's expansion into the compact disc manufacturing business. HRM's chairman, George Fishman, and its president, Donald Olesen, will maintain their positions with the company after the proposed merger. H. Sean Mathis, president of RCL, said, "This agreement is the culmination of RCL's six month search for an operating business with significant historical operating profit, superb management and a very exciting growth plan. The top executives of HRM have extensive experience in the music business, and we are excited about working together to realize the potential for this company." For the trailing 12 months ended Dec. 20, 1992, on a pro-forma basis, assuming the completion of the merger and a reduction of $6 million in HRM's outstanding indebtedness, the combined company would have reported net income of approximately $2.5 million on revenues of approximately $46.4 million. This performance would have represented net income of approximately $0.42 per share of RCL common stock (assuming no exercise of RCL's Class A and Class B common stock purchase warrants). The pro forma data indicated above are based, in part, on unaudited operating results and are not necessarily indicative of the financial results which actually would have been achieved for such period. For its fiscal year ended July 26, 1992, HRM reported net income of $1.8 million on revenues of $40.7 million. For the five months ended Dec. 20, 1992, HRM reported (unaudited) net income of approximately $1.6 million on revenues of approximately $22.7 million, compared with net income of approximately $0.8 million on revenues of approximately $17.0 million for the five months ended Dec. 22, 1991. This represented an increase in net income of approximately 100 percent and an increase in revenues of approximately 33.3 percent. The letter of intent provides for a period of exclusivity through March 31, 1993, during which the parties will conduct further due diligence and attempt to reach a definitive agreement. While RCL expects to negotiate and sign a definitive merger agreement as soon as possible, there can be no assurance that RCL will be able to consummate the transaction. The transaction will require RCL shareholder approval. RCL Acquisition Corp., a "blind pool" company, completed its initial public offering in August 1992. -0- 2/17/93 /CONTACT: H. Sean Mathis, president of RCL Acquisition Corp., 212-941-2558, or David Walke or Edward Nebb of Morgen-Walke Associates, 212-986-5900, for RCL Acquisition Corp./ (RCLA)
CO: RCL Acquisition Corp.; HRM Holdings Corp. ST: New York IN: ENT SU: TNM
TM -- NY003 -- 7096 02/17/93 07:30 EST
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|Date:||Feb 17, 1993|
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