A Win Win Case For Fuqua?

After posting a loss last year because of some major write-offs, Fuqua Industries, once a large conglomerate, is expected to be back in the black this year. Yet its stock is down from 17 in March to 10. The Street's worry has to do with another company, Intermark, which is on the verge of filing a prearranged Chapter 11 reorganization. The problem: Intermark owns 26.2% of Fuqua.

Intermark owes Fuqua $32 million, for which the 26.2% stake was used as collateral. The loan is already in default, and Fuqua has given Intermark until Sept. 29 to settle the matter.

But some pros see the situation as a big plus for Fuqua and have been buying in. They insist that Intermark will have to sell the stock to pay off the loan. "However you slice it, the forced sale of the block to interested parties will only enhance the attraction of Fuqua," says one New York fund manager. He claims that it puts Fuqua in play as a takeover target. The company, which has just completed a major restructuring, now has three businesses: film processing (a joint venture with Eastman Kodak), lawn and garden equipment, and sporting goods.

Intermark is holding talks with its creditors to decide what to do. Fuqua has the right of first refusal on the 26% stake, so Intermark's creditors will have to get Fuqua's cooperation in dealing with the large block of stock. One Fuqua insider says Intermark bondholders may seek possession of the stock. To do this, they would have to first pay the $32 million that Intermark owes Fuqua--a plus for Fuqua.

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