Allegheny Beverage Corp. said yesterday it has signed a letter of intent to sell its original business, Allegheny Pepsi-Cola Bottling Co., to an employe stock ownership plan for a net price of $175 million.
The corporation, which is planning to get out of the soft-drink business, change its corporate name and focus on service businesses, said it expects to complete the sale by Feb. 28. The money for the sale will come from bank loans and money supplied by Santa Fe Associates Inc., which is partially owned by nine neighboring Pepsi franchises.
"I went into business to make money, not Pepsi-Cola," said Allegheny chairman and chief executive Morton M. Lapides, who launched the company in 1960 with the purchase of the central Pennsylvania Pepsi franchise.
The company has since expanded into a diversified services conglomerate with operations in food service and vending, coin-operated laundry, building maintenance and office furniture.
Allegheny plans to use part of the proceeds of the sale to pay off all of its $160 million senior debt. The interest expense on the debt exceeded the operating income of the bottling company by $6 million, Allegheny said.
By lowering its debt, Allegheny will be able to arrange financing at lower interest rates for its previously announced acquisition of Servomation Corp., a food service and vending company, for $225 million, Lapides said.
The bottling company sale will be tax-free because the company is being sold to an employe stock ownership plan and because the money will be reinvested in the Servomation purchase, which should be completed by March 15, Allegheny said.
The bottling subsidiary "used to be the backbone" of the company, but accounted for 28 percent of Allegheny's $670 million 1984 sales, Lapides said.
Allegheny also intends to sell its only other beverage-related subsidiary, Fowler Products Co. Inc., of Athens, Ga.
Lapides said the remaining company will change its name to something "more descriptive of a service company," and will close its Baltimore offices, making Cheverly its headquarters.
After shedding the beverage subsidiaries and buying Servomation, the company expects annual revenue of about $1.2 billion, Lapides said.
With Servomation, the food services and vending operations should generate sales of slightly more than $1 billion a year, he said.
"Six months ago, my goal was to be a $1 billion a year company by the end of 1986," Lapides said. "I guess the next goal is to make $2 billion. We'll take it one billion at a time," he said, predicting he would hit that target in three years.
Lapides said the company will focus its strategy around the four remaining service divisions and may add a fifth -- health care.