Four in a Lifeboat for Three

Amid today's increasing pressure for business growth through merger, it is inevitable that some corporate marriages turn out unhappily. Yet divorce, which ends a quarter of the marriages among the nation's people, remains a comparative rarity among companies. Last week, in an unusual split-up intended to revitalize the fortunes of both companies, the oil-realty-finance combine of Sunasco Inc. formally dissolved its ties with subsidiary Sunset International Petroleum Corp.

It did so by selling Sunset Petroleum, which had $20 million worth of losses in California real estate last year and plunged Sunasco deeply into the red. The buyer: Manhattan's Commonwealth United Corp., a movie-making (The Pawnbroker) and -distributing company with realty and insurance sidelines. Price: $25.2 million, paid in Commonwealth stock. In an accompanying deal akin to a divorce settlement, Sunasco lined the coffers of money-shy Sunset with $ 1,000,000 in cash and $8.6 million worth of Sunasco stock-chiefly in exchange for Sunset's interest in five California realty ventures.

The Nth Degree. Along with Sunset, Commonwealth acquired its president, A. (for Austin) Bruce Rozet, 39, and this week it expects to elect him its own $60,000-a-year president and chief executive officer. Against overwhelming odds, Rozet over the past year has steered Sunset away from impending financial disaster. "We're taking our licks publicly," he said not long ago. "We have moved from the nth degree of impossibility as a company to a couple of degrees away from real possibilities."

Sunasco's troubles began almost as soon as the company was created in April 1966 by a merger of Beverly Hills-based Sunset International Petroleum with suburban Philadelphia's Atlas Credit Corp., a mortgage-banking, title-insurance and home-repair finance concern. First, a plan to float $14 million worth of long-term debentures went awry in the 1966 credit squeeze. Then the merger partners, Atlas' John L. Wolgin and Sunset's Morton Sterling, locked horns over how to raise money for the ailing realty side of their operation. Recalls Rozet: "There were four children in the lifeboat, with food enough for three."

In part, Sunasco suffered from a classical pitfall of corporate mergers: split management. With Wolgin and Sterling sharing command, and with a board of directors evenly divided between their supporters, a deadly stalemate persisted while problems mounted. The impasse ended only when both men turned operational control over to Rozet, a onetime production-line engineer for Douglas Aircraft who was then financial vice president of Sunasco. Rozet decided that the only solution was to rip the combine apart again.

Tightfisted Buyers. It wasn't easy. Expansion-minded Sunset was saddled with several white-elephant projects and mountainous debts ($130 million last June). To reduce that burden, Rozet persuaded lenders to stretch out some loans and cancel others in return for undeveloped acreage. Last November he put $50 million of Sunset's realty holdings up for auction in Los Angeles, but buyers proved so tightfisted that he accepted bids for only $6,000,000 worth. That netted Sunset a mere $300,000 above the $5,700,000 debt on the properties involved. But the company still had some useful assets, including profitable gas and oil wells, a thriving residential project near San Diego and $17 million worth of losses on its books that Commonwealth can carry forward to reduce its income tax liability on future profits.

With Sunset thankfully stripped of most of its money-losing ventures, Commonwealth is eagerly looking ahead to expansion in oil, motion pictures and service industries for its next growth. As a start, the company agreed last month to buy Hollywood's Television Enterprises Corp., a privately owned maker of low-budget films. Since the divorce plan was divulged, Sunasco shares have gone from a December low of $7.63 on the New York Stock Exchange to $9.38 last week. For sheer corporate melodrama, Rozet's rescue might make a film itself.

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