NEW YORK — Merrill Lynch Interfunding Inc., which paid $4,900 for 49 percent of Norton McNaughton Inc. in a 1991 leveraged buyout, netted another $7.5 million last week from the sale of 592,140 shares.
That brought Merrill Lynch’s total take in the recent Norton McNaughton initial public offering to $31.8 million and completed the sale of Merrill’s entire stake in the company.
In the original offering, Merrill Lynch was planning to sell 900,000 shares, but strong investor demand for the hot career apparel firm allowed Merrill Lynch to sell another 1 million shares in the offering plus the shares last week as part of an underwriter’s overallotment option.
The overallotment shares were sold to McNaughton’s underwriting group, led by Mabon Securities Corp. and Wheat First Securities.
Sale of the additional shares was made possible by the vigorous market reaction to McNaughton’s stock, which came to the market on March 7 at $14 a share. It closed Friday at 20 on the over-the-counter market, representing a 43 percent surge in two weeks.
Meanwhile, McNaughton continued to impress Wall Street with the report last Thursday of a profit of $710,000, or 12 cents a share, in the first quarter ended Feb. 2, rebounding from a loss of $237,000 a year earlier. Sales jumped 39.7 percent to $30.2 million from $21.6 million.
Sanford Greenberg, McNaughton’s chairman and chief executive officer, said the sales gains were fueled by continued strong demand for all the company’s product lines. Its lines include Norton McNaughton, Norton McNaughton Petites, Maggie McNaughton, McNaughton Wear, Modiano, and Pant-Her.
McNaughton itself raised $37.15 million from the sale of 2.9 million shares as part of the offering. Of McNaughton’s market proceeds, Merrill Lynch will get $20 million as repayment for loans and to redeem preferred stock. Another $13 million of McNaughton’s proceeds is expected to be used to pay NationsBanc Commercial Corp. for factoring advances.
The three founders of the company continue to hold significant stakes. Along with Sanford Greenberg, Norton Sperling, president, and Jay Greenberg, Sanford’s brother and executive vice president, each hold 795,450 shares in the company, representing 10.1 percent stakes. At the current market value, the stock holdings of each would be worth about $15.9 million.