CMS Advertising to Merge with American Educational

Inc. and American Educational Computer Inc., both of Oklahoma City, has been approved in principle by the boards of directors of both firms, it was announced Wednesday.

CMS, parent company of a direct mail advertising firm, would be the surviving corporation, with American Educational Computer to merge into CMS or with a subsidiary of CMS, said John Simonelli, chairman of CMS.

CMS and American Educational Computer, both publicly-held companies, would continue to be based in Oklahoma City, said Simonelli, with CMS continuing as a holding company and American Educational Computer as a subsidiary. CMS also owns United Coupon Corp. of Springfield, Va.

The proposal includes no cash, he said.

Under the preliminary terms, all American Educational Computer outstanding common stock at the closing of the merger would be converted into 750,000 shares of CMS common stock. CMS stock closed Wednesday at 2 5/8, down 1/2, while American Educational Computer stock closed at 1/4, down 1/8. Both are traded over-the-counter.

In addition, American Educational Computer stockholders would receive 600,000 shares of convertible non-voting non-trading preferred CMS stock, which could be converted into CMS common stock at $2.40 per share.

If all of those preferred shares were converted, CMS would receive $1.44 million in new capital, said Simonelli.

CMS now has 4,603,167 shares of common stock and 613,814 warrants (each to purchase one share of common stock) outstanding. The warrants closed Wednesday at 1 1/8, down 3/8.

American Educational Computer, which was formed in 1981 and went public in 1983, has 6,355,410 shares of common stock outstanding.

The proposed merger is subject to execution of a definitive agreement and approval by the boards of both firms plus shareholders of American Educational Computer. It also is subject to a satisfactory ruling or opinion that the exchange of stock will be tax-free, said CMS, and to satisfaction of other customary conditions.

CMS, which was formed in 1984 and went public in 1986, franchises cooperative direct mail advertising operations through United Coupon Corp., which was acquired in 1987. American Educational Computer publishes and markets educational and entertainment computer software and video to retail and school markets in all 50 states.

The proposed merger has the potential of increasing CMS total revenues to about $6 millon a year, as the two firms stand now, said Simonelli.