Cardis Agrees to Sell Tuneup Masters to Investor Group for $82 Million

Debt-laden Cardis Corp. said Monday that it has signed an agreement to sell its profitable Tuneup Masters subsidiary for $82.2 million in cash to an investment group that includes several real estate developers and the chairman of Auto Spa Corp., a franchiser of auto service centers.

The purchase price is almost 54% more than the $53.4 million in cash and stock that Cardis, which is based in Buena Park, paid for Tuneup Masters in September, 1986.

Cardis spokesman Roger Pondel said the purchasers include Benjamin Zitron, chairman of Great Neck, N.Y.-based Auto Spa, which operates 90 auto service outlets or auto service malls in the East; Howard Farkas, a Denver real estate developer; Melvin Simon, a real estate developer in Indianapolis, and Burton Kantor, a Chicago venture capitalist.

Peter Greendyk, a spokesman for Auto Spa, said the four investors each will have a 20% share in Tuneup Masters. The remaining 20%, he said, will be owned by Andy Granatelli, who sold Tuneup Masters to Cardis but remains as the company’s chairman.

Pondel said the investors will pay $78.2 million directly to Cardis and also will pay Granatelli $4 million owed him by Cardis.

Granatelli, an auto racing executive, said no deal has been made regarding his involvement in the new company.

He did say, however, that he expects to stay with Tuneup Masters, a company based in Woodland Hills that operates 232 quick-fix auto repair shops in eight Western and Southwestern states. Granatelli also said he expects to maintain his current 16.7% stake in Cardis.

Greendyk said the investors plan to use the Granatelli and Tuneup Masters names to help expand the Auto Spa Auto Mall concept in the Western states.

Auto Spa, which owns the land on which malls are built, currently operates 15 malls and expects to open several hundred over the next few years. The malls’ stores offer after-market car services, including car detailing, tuneups and cleaning.

The sale of Tuneup Masters will give Cardis cash to help reduce its growing debt, which currently exceeds $100 million, Pondel said. Cardis will use the proceeds to pay off a $43.5-million loan to Tuneup Masters from Dresdner Bank, a West German institution. The loan was due Dec. 31, 1986, but was extended and now is payable on demand.

Cardis has been unable to win further extensions on its debt payments to Security Pacific National Bank, its largest creditor. The company has a $25-million payment due Saturday and $9 million more due Nov. 30, Pondel said. Cardis Chairman Jack I. Salzberg said his company is discussing a comprehensive restructuring or refinancing of its remaining debt.

Failure to meet or alter the current deadlines could force Cardis into bankruptcy proceedings, but the company denies that bankruptcy is being considered.

While the sale of Tuneup Masters helps Cardis shore up its debt, the sale also strips the company of what an industry analyst calls its “crown jewel.” Cardis, the nation’s third-largest auto parts distributor, purchased Tuneup Masters to provide a retail outlet for its products.

Cardis reported losses of $35.5 million and sales of $349.4 million for the 18 months ended April 30. But Tuneup Masters has been consistently profitable and had sales of $52 million in its fiscal year ended Sept. 30, 1986.

Cardis said it expects the deal to close within a month.