Germans Bid, And Land A Bargain

Escom Ag Submitted A Winning Bid Of $6.6 Million For Commodore's Assets

A Judge, However, Still Must Approve It

By Dan Stets, Staff Writer
Inquirer

April 21, 1995

NEW YORK — Escom AG, of Germany, picked up the assets of Commodore International Ltd. for the bargain-basement price of $6.6 million at an auction here yesterday.

About a half-dozen companies interested in Commodore's assets appeared at the auction, but only Escom and Dell Computer Co. submitted bids backed up by the required $1 million security deposit.

Dell's bid was disqualified because the company attached some unspecified conditions.

Escom president Manfred Schmitt said his company would resume manufacturing Amiga and other popular Commodore products and start making Apple- and IBM- compatible computers with the Commodore name for the European market.

Schmitt said he would attempt to manufacture all of the traditional Commodore products, even the advanced Amiga 4000, in China. He said he planned to approach Motorola Co. about microprocessors for a new Commodore PowerPC, which would be similar to the PowerMac manufactured by Apple Computer Co. This new PowerPC would likely be built in Europe.

Escom has no plans to resume any of Commodore's American manufacturing operations. Commodore had its North American headquarters in West Chester.

However, before Escom can launch its new strategy, the purchase must be approved by the U.S. Bankruptcy Court in New York and the Supreme Court of the Bahamas, where bankrupt Commodore was incorporated.

That approval is not yet certain since Commodore's creditors have not yet agreed to the sale price, and both IBM and the trustee for Commodore's assets in the Netherlands, the United Kingdom and the Philippines are objecting to the sale.

Judge James L. Garrity Jr. has scheduled a hearing in U.S. Bankruptcy Court for today to consider the proposed sale to Escom as well as the objections. Commodore's creditors are owed more than $100 million. Previous estimates of Commodore's auction value were as high as $20 million, so the creditors are likely to have reservations about the Escom sales price.

The auction, which was supposed to be the end of Commodore's bankruptcy saga, was a bizarre affair. A standing-room-only crowd of 65 people filled a conference room at the Midtown headquarters of Fullbright & Jawowrski, the American law firm representing Commodore's Bahamian liquidators.

Almost half the group were lawyers. There were representatives of the creditors' committee and of two creditors, Prudential Insurance and Microsoft Co. Also on hand were representatives of a Chinese electronic-game company, New Star, as well as another Chinese company, Tietsin Trust & Investment Co., which is the parent firm of yet another game company.

If its proposal is approved, Escom plans a joint venture with Tietsin to manufacture the traditional Commodore products at a factory near Beijing.

Also represented were several small American technology companies, including Computer Connection, of Stockton, Calif., which submitted a bid which was disqualified because the firm failed to include the required $1 million deposit.

One attorney joked that never had he seen so many people show up for an auction prepared to pay so little.

Schmitt said he was not surprised that Escom apparently had been able to acquire Commodore for such a low price. If the other companies had been willing to pay more, they would have signed a contract with the liquidators months ago.

Another likely bidder, Creative Equipment International, of Miami, apparently teamed up with Dell in its unsuccessful bid. The managers of Commodore's United Kingdom team, who have been trying to buy Commodore's assets for months, withdrew before the bidding began.

Dell was represented at the auctions by Dalton Kaye, the company's vice president and treasurer, who said after the auction that his company had not yet given up its attempt to buy Commodore.

Kaye complained that Dell had become aware of the auction only two weeks ago and had not yet had time to evaluate either the bid documents or Commodore's assets.

Dell, of Austin, Texas, makes personal computers for businesses and individuals. In its latest fiscal year, which ended in January, sales rose 21 percent to $3.5 billion, and the company had a profit of $149 million compared with a loss of $36 million the year before.

Neither the amount of the Dell bid nor of the Computer Connection bid was made public. Kaye declined to specify what conditions Dell had attached to its bid.

If Dell is really serious about pursuing Commodore, a shoot-out with Escom could prove interesting. Dell had sales last year of $3.4 billion. Escom, which is the second largest computer company in Germany, had sales of about $1.1 billion.

Escom will end up paying the Bahamian liquidators no more than $5 million for Commodore's assets. The company already has paid the German bankruptcy trustee of Commodore's German subsidiary 2.2 million German marks, the equivalent of about $1.6 million for the right to use the Commodore logo in Germany.

Copyright 1995