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H & R; Block Inc. has agreed to sell its Irvine-based Option One Mortgage Corp. to private equity firm Cerberus Capital Management LP, the Kansas City-based tax preparer said last week. A definitive purchase price for Option One, the company’s beleaguered subprime lending unit, is unclear. But it won’t be as much as the $1.3 billion H & R; Block was aiming for when it said it would put Option One up for sale late last year. H & R; Block said the cash price will be the value of the tangible net assets of Option One at the date of the deal’s closing, minus $300 million. The sale is expected to close by the end of October. As of Jan. 31, the net assets of Option One were $1.27 billion. But because of changing market conditions in the subprime sector, the price will be different at the time the deal closes, H & R; Block said. Analysts predict New York-based Cerberus will pay a maximum of $800 million for the company, which makes loans to borrowers with less than perfect credit.
Santa Monica-based Fremont General Corp. said last week that it is close to selling its shuttered Brea-based subprime mortgage division. An unnamed buyer also has agreed to buy $2.9 billion of Fremont’s subprime loans. The sale of the loans, which make up the majority of the company’s unfunded subprime loans, will result in a pretax loss of about $100 million, Fremont said. The buyer would obtain Fremont’s subprime home loan servicing business and part of its subprime loan origination operation. Also included in the deal are Fremont’s mortgage servicing rights, servicing advances, residual interests and mortgage-backed securities. The deal has not yet been finalized, the company said.
Irvine’s New Century Financial Corp. received bankruptcy court approval last week to sell its loan-servicing business for a minimum of $133 million. The lead bidder is Carrington Capital Management LLC, a hedge fund formed by New Century insiders in 2004, according to a Reuters report. About 25 other bidders have expressed interest in the loan-servicing unit, one of the more valuable remaining assets of New Century, which filed for Chapter 11 bankruptcy on April 2. Carrington’s bid will be reviewed at a May 18 hearing at the Delaware bankruptcy court. Any other bidders will have to offer $5 million more than Carrington in order to win.
Irvine’s Netlist Inc., a maker of memory products, lowered its outlook for first-quarter results, citing unsold products and weak demand from two big customers. Netlist expects sales of $37 million to $38 million for the quarter, down from its earlier estimate of $40 million to $42 million. Wall Street expected first-quarter sales to come in around $41 million. The company also lowered its profit views to $392,000 to $588,000. That’s down from the company’s previous estimate of $1.4 million to $1.6 million. The company cited a glut in supplies of its dynamic random access memory boards as to why it lowered its earnings. Netlist supplies circuit boards with memory chips to Dell Inc. and other computer makers.
Santa Ana’s MSC.Software Corp., which makes software used by manufacturers to test their designs, said last week restructuring charges would lead the company to post a loss in the first quarter. The company expects sales of $56 million to $58 million for the quarter, falling short of Wall Street’s views of about $64 million. In 2006, MSC reported $67.4 million in first-quarter revenue. The company didn’t give figures for the loss it expects. Analysts expected MSC.Software to post a profit of about $2.2 million. MSC.Software said it expects to show a restructuring charge of about $7 million on its books, due to costs from a big round of job cuts earlier this year.
Irvine medical device maker Masimo Corp. last week said it plans to raise up to $150 million in an initial public offering. Masimo didn’t disclose how many shares would be offered, nor did it provide an estimated price range for the offering, according to a Securities and Exchange filing. The device maker said it expects to use proceeds from the offering for ongoing research and development, sales and marketing activities and other items.
Foothill Ranch-based sunglasses maker Oakley Inc. said first-quarter sales and profit rose from a year earlier. Sales were up 31% to $199 million. Profit increased 20% to $5.7 million. Oakley upped its 2007 forecast. The company said it now expects $660 million to $681 million in earnings. It had previously expected a profit of $653 million to $674 million.
