CEO Resigns at Troubled Convenience-Store Chain
PHOENIX (AP) _ Karl Eller, an expansion-minded leader whose name was synonymous with Circle K Corp. for seven years, has resigned as chairman and chief executive of the debt-ridden convenience store chain.
Eller, 61, presided over an expansion that saw Circle K grow from 1,200 stores in 1983 to the nation’s second-largest convenience chain with 4,685 in 33 states last November. In the process, it rang up debts of $1.3 billion.
No replacement was named Monday, but the company said president Robert A. Dearth Jr., 45, would manage operations, with oversight from the board of directors.
Spokesman Ray Cox said Eller resigned to pursue personal business opportunities.
Cox said Eller and Circle K executives agreed not to comment beyond a statement announcing the resignation.
Eller said in the statement that with the company in the process of restructuring, it was time for him to step aside and give the directors the latitude to establish new objectives.
Circle K last month halted interest payments to bondholders under a plan designed to restructure its debt load. The agreement with its senior creditors and its largest shareholder, American Financial Corp., gave it a seven-month moratorium on debt and interest payments.
Circle K had threatened to file for reorganization under Chapter 11 of U.S. bankruptcy laws if it was denied a reprieve on its debts.
The agreement gave bank lenders that have extended nearly $800 million in senior debt to Circle K the right to determine whether the company can pay interest on subordinated debt. Officials have said the restructuring could include exchanging some outstanding subordinated debt securities for new bonds, stock or cash.
Circle K is the nation’s second-largest convenience store chain behind Southland Corp., owner of 7-Eleven. Circle K has announced plans to sell 350 stores in the Pacific Northwest and another 25 in Hawaii, but Cox said neither sale had closed.
Eller, a Circle K director since 1972, became chairman and chief executive in June 1983.
The growth in the number of U.S. stores - in addition to 1,400 licensed or joint ventures overseas - cost Circle K $850 million, much of it raised through risky high-yield junk bonds issued by Drexel Burnham Lambert Inc.
In addition to rising interest payments, company officials have blamed Circle K’s problems on intense competition in the industry, including the spread of convenience stores run by oil companies able to sell gasoline more cheaply.
Circle K in March announced a $40 million operating loss for the quarter ended Jan. 31.
Analysts said Eller, who in late 1988 told stockholders expansion was the key to the company’s survival, failed to provide for stability after growth.
″He built the empire, but it’s clear there wasn’t anybody beneath him. He didn’t build the infrastructure to operate it,″ said Dennis Telzrow, an analyst with the Dallas brokerage Eppler, Guerin & Turner.
Telzrow said Eller’s departure was expected after Circle K hired Dearth away from United Brands Co. in January.
Sheryl Gillett Caudana, granddaughter of Circle K founder Fred Hervey, also criticized Eller’s management.
″I felt that he was making some decisions that were not in the interests of either the long-term survival of the company or the stockholders,″ she said.
Eller in 1968 founded Combined Communications Corp. and in the next decade built the company into one of the nation’s largest mass-media enterprises.
He sold the company in 1979 to Gannett Co. and spent the next four years as director of the communications division of Columbia Pictures Industries and as a financial consultant in Phoenix.