A Philadelphia investment company that acquired 95 percent of the E.C. Ernst electrical contracting firm through bankruptcy proceedings yesterday announced plans to buy out the remaining public stockholders for 5 cents a share.
The transaction -- if completed -- would end the long bankruptcy reorganization of Ernst by merging it with Philadelphia Bourse Inc.
"This is a key move calculated to get us back on our feet," said Ernst's financial vice president, Philip Facchina.
Ernst, a Fairfax-based company that was once the second-largest electrical contractor in the nation, emerged from nine years of operation under protection of the federal bankruptcy courts in December. The bankruptcy reorganization was complicated by Ernst's implication in a nationwide electrical contracting price-fixing case in which it and several other firms were indicted.
Philadelphia Bourse is a private holding company owned by Philadelphia investor Howard Butcher III. Last year, the firm acquired 32 million shares of Ernst's common stock -- about 95 percent -- for $2.5 million, plus an advance of $600,000 in operating capital and forgiveness of a prior advance of $303,000. About 1,980 shareholders own the remaining 1.6 million shares of Ernst's stock.
Facchina refused to comment on the direction the firm is likely to take following the merger. It has yet to be decided whether the firm will continue to operate under the Ernst name after the merger. He said he does not expect Ernst to operate at a profit for "quite a few years."
For the nine months ended Dec. 31, Ernst posted a net loss on operations in excess of $2.5 million. It reported losses of $326,000 in the last quarter, according to Facchina. The contractor filed for Chapter 11 protection in 1978, blaming its financial problems on overextension and overseas expansion into Latin America and Saudi Arabia. At that time, Ernst owed about 2,000 vendors, suppliers and contractors about $27 million. Under the bankruptcy settlement, the firm agreed to pay its creditors 10 cents on every dollar owed them.
Ernst was indicted by the Justice Department in 1983 for violating the Sherman Antitrust Act in a bidding-rigging scheme involving three other major electrical contractors. The firm pleaded no contest to the charges