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Printed
in: IBJ Reporter Indianapolis-based Perfect Line Inc., which operates NASCAR race-simulator centers in shopping malls across the country, has brokered a deal that puts it in position to finance aggressive expansion plans. Perfect Line officials recently merged with publicly traded Utah-based Pacific International Holding Inc. to form Interactive Motorsports & Entertainment Corp. Pacific, which focused on Web site design and development, agreed to essentially evaporate and its board and officers resigned in exchange for an 18-percent share for its stockholders in the new public company. The investment group that backed Perfect Line owns the other 82 percent. Perfect Line is now a wholly owned subsidiary of IMEC, and gained the financial flexibility of a public company without the ordeal of an initial public offering. A group of Perfect Line investors had told company officials they would pony up money to erase Perfect Line's debt and begin expansion if Perfect Line could pull off the merger to become public. "With the recent completion of [that] $2.6 million private equity financing, the company is essentially debt-free and well-positioned for growth," said Bill Donaldson, Perfect Line's chairman and CEO. Perfect Line has 12 NASCAR Silicon Motor Speedway outlets and more than $1 million in working capital, he said. IMEC officials can now raise even more capital by issuing stock for a cadre of expansion ideas-including pairing with theme parks, launching mobile units and taking the operation overseas. Donaldson, 45, who formerly supervised licensing operations and broadcast properties at the Indianapolis Motor Speedway, also takes the position of chairman and CEO of parent IMEC. Sources said Donaldson's latest move was a shrewd maneuver to take his operation public faster and cheaper than through an initial public offering. Donaldson did not discount the possibility of future acquisitions or mergers for IMEC. "We're clearly going to need more capital to expand at the rate we want to and we'll continue to look at interesting ways to go about that," he said. IMEC's ability to issue stock and raise revenue could send the company on its way to opening another 30 or so stores in the next 36 months. Donaldson's original plan was to have 50 outlets by 2005, but he said company officials are still formulating an expansion time line. He said he is already getting inquiries about buying stock in the company, which is traded under the symbol IMTS on the Over the Counter board. This is the latest in a series of maneuvers by Donaldson, who worked nearly two decades for IMS and was instrumental in launching the Brickyard 400 and Indy Racing League. Last fall, Perfect Line purchased the assets of Campbell, Calif.-based Silicon Entertainment Inc., which operated the NASCAR Silicon Motor Speedway racing centers. High overhead costs and massive debt pulled the California company under, and Donaldson's company swooped in and bought the assets for pennies on the dollar, sources said. Officials for Silicon Entertainment reported an initial investment of $45 million to $60 million, but a Chapter 7 trustee for the U.S. Bankruptcy Court in San Jose, Calif., where the case was filed, said Perfect Line paid about 10 percent of that. Donaldson has lamented the lack of marketing and advertising his firm has been able to afford, but the interactive racing centers still generated $3.5 million from June through December 2001, and $4.7 million during the first half of this year. "The frustrating part is we haven't had the working capital to do any more than open up the gates and hope people realize we're open," Donaldson said. "With the infusion of capital, we're going to really be increasing our marketing and dramatically up the merchandise inventory." Perfect Line's racing centers are designed to give customers an experience that comes close to real NASCAR racing. Each center is about 6,000 square feet and features eight to 14 Winston Cup race car simulators. Donaldson has already secured the blessing of NASCAR for his operation and licensing deals to simulate some of NASCAR's most famous tracks. Donaldson has also laid the foundation for increased merchandising at the centers. NASCAR Silicon Motor Speedway centers are in Minneapolis; Charlotte, N.C.; Atlanta, and Douglassville, Ga.; Houston; Grand Rapids, Mich.; Albany and Nyack, N.Y.; Birmingham, Ala.; Los Angeles; Nashville, Tenn.; and Chicago. Despite lack of marketing, those outlets have a loyal following. "A lot of people come to the mall just for that store," said Mace Hirt, general manager of the Kay Mills Mall in Houston. Donaldson said he'll target tourist destinations such as Las Vegas; Orlando, Fla.; and New York City, though an outlet in Indianapolis is also a distinct possibility. Perfect Line has 32 simulators in warehouses ready for installation in new sites. Perfect Line also has plans to expand beyond the United States, possibly using a Formula One format or other type of racing. Mobile centers and outlets in theme parks also are part of the expansion plan. But Donaldson has no plans to incorporate the open-wheel cars that frequent his former employer's track. "In the U.S., we'll continue with NASCAR," Donaldson said. Though his stance shows no particular loyalty to the IRL, industry sources said it shows a calculated shrewdness. "It's a huge advantage to have the NASCAR name attached to a property like this," said Mel Poole, president of SponsorLogic, a Charlotte, N.C.-based motorsports marketing consultancy. "Marketing is going to be critical for continued growth of an operation like this, and NASCAR fans provide a ripe target. There's no flattening to the popularity of NASCAR." Poole said Donaldson appears to be picking the right time to marry two hot commodities, pointing out that last year, gross sales of video and electronic games exceeded movie ticket revenue. "We've got an exclusive license from NASCAR for this category, and the interactive experiences are at the top of the list of trends today," Donaldson said. "That gives us a real edge in the marketplace."* E-mail: ASchoettle@IBJ.com |
Former
IMS Honcho Takes Firm Public