Toy and sporting goods maker SLM International Inc. has agreed to sell its Buddy L toy subsidiary to Empire of Carolina Inc. of Delray, Fla. New York-based SLM announced Jan. 23 it had signed a letter of intent for the deal. It said Buddy L had sales of about $150 million for the year ended Dec. 31, 1993. The two firms did not disclose terms of the deal, which they plan to finalize by Feb. 28.
SLM's financial difficulties ``certainly were a driving cause for the deal,'' said analyst Scot Ciccarelli with Gerard Klauer Mattison & Co. of New York.
Ciccarelli said SLM recently violated loan covenants, did not have much cash on hand and had high inventory levels.
Officials for SLM, Empire of Carolina and their public relations firm in the deal, Morgen-Walke Associates of New York, could not be reached for comment after repeated phone calls.
Howard Zunenshine, SLM chief executive officer, said in a news release that the sale will reduce SLM's debt significantly and allow it to take advantage of opportunities in its sporting goods and fitness businesses.
``We are very optimistic that this transaction is the first step in restructuring the company to enhance stockholder value,'' Zunenshine said.
Buddy L makes toy trucks and vehicles, including plastic ride-on vehicles. SLM bought BuddyL Corp. in 1990 and expanded the business, which had sales of only $23 million in 1989.
Empire of Carolina's toy business includes Carolina Enterprise in Tarboro, N.C., a producer of plastic wagons, Big Wheel tricycles, toys, games and novelties.
Ciccarelli said Buddy L was in financial trouble and ``needed new direction, which led to the talks'' about selling. The prolonged strike, recently settled, in the National Hockey League also hurt sales of SLM's sporting goods, which include hockey equipment and skates.
Ciccarelli said recent speculation about SLM being close to bankruptcy may have been quashed by the agreement with Empire of Carolina. He said he was not sure of SLM's current financial situation because SLM officials ``haven't talked to Wall Street recently.''
Seidler Cos. Inc., another New York brokerage firm, noted in a Sept. 1 report that SLM's short- and long-term borrowing grew to meet higher working capital needs by the end of the second quarter.
The firm recorded a loss of 3 cents per share in the second quarter, vs. profit of 28 cents per share a year earlier. SLM's sales in the quarter, at $81.7 million, were about 24 percent higher than a year earlier, led by gains in sporting goods and fitness. Toy sales, at $30.2 million, were down 13 percent, partly because of competitive margin pressure on Buddy L trucks.
SLM is publicly traded on the Nasdaq over-the-counter system, while Empire trades on the American Stock Exchange. SLM has expanded aggressively in the past few years in sports apparel, toys and recreational products. Its plants making plastic parts include operations in Gloversville, N.Y., and Beauport, Quebec.
One of SLM's main rivals, Canstar Sports Inc. of Montreal, agreed in December to be acquired by Nike Inc. of Beaverton, Ore., in a move to launch the footwear giant into hockey and related equipment markets.
