A company tied to a Forsyth County native with a checkered financial past has made an unsolicited offer -- to buy Krispy Kreme Doughnuts Inc. for more than $500 million.
MGL Asset Management Group LLC of Charlotte said in a statement yesterday that it has made an offer of $7.25 a share to James Morgan, the chairman and chief executive of Krispy Kreme. MGL said it would assume Krispy Kreme's debt as part of the transaction.
Dee Guess, the managing director of MGL, said in a statement that he intends to begin discussion with Krispy Kreme's major shareholders "in coming weeks."
Analysts, however, were quick to question the legitimacy of Guess' offer.
Part of the questioning comes from confusion about just who Guess is.
His full name is Jerry Demario Guess. But according to at least two lawsuits filed against him, he also goes by Mario Guess, J.D. Guess and Jerry D. Guess.
Guess and another of his companies, Ligna Acquisition Group LLC, are defendants in at least two lawsuits in the Western District of U.S. District Court, which is based in Charlotte. He is identified as Mario Guess in the lawsuits. Ligna and MGL also share the same place of business in Charlotte.
Guess, 23, declined to conduct a phone interview, but he did respond to questions by e-mail through a gmail.com account. He would not say whether he had gone by other names.
The number listed for MGL on its Web site -- www.mglasset.com -- disconnected after a brief message.
When asked about questions being raised about the legitimacy of the offer, Guess, who signed the e-mail Dee Guess, gave a barebones response and did not speak to allegations in the lawsuits.
"Regardless of any research, that has no bearing on my capabilities and existing relationships with some of the most respected executives and financial organizations around the globe to make this deal work," Guess wrote.
"Our offer is a legitimate offer and it's a transaction that we've been considering for quite some time," Guess wrote. "I see key problems with Krispy Kreme being the fact that the company has lost its innovation."
Another part of the analysts' questioning comes from a lack of information on the MGL Web site.
There is no listing of principals in the company, no companies under MGL's management or ownership, and no track record of the principals managing and owning businesses. MGL was listed as incorporating in January on the N.C. Secretary of State's Web site.
"I smell a rat here," said Tony Plath, a finance professor at UNC Charlotte, "Anybody that feels it necessary to tell me just how sophisticated their organization is on their three-page Web site doesn't sound all that sophisticated at all.
"Unless this is a front for somebody with real money, my instincts are telling me scam, scam, scam."
The offer by MGL comes about three weeks after Krispy Kreme posted its first profitable quarter in 3½ years and two weeks after Morgan provided an optimistic forecast during a shareholder meeting.
Over the past four years, Krispy Kreme has struggled to adapt to the changing tastes of U.S. consumers. It is still being investigated by federal authorities about past accounting practices.
In January, the company replaced Daryl Brewster, its president and chief executive, with Morgan. And higher prices for raw materials and gas are having an influence on the company and its franchisees.
"But we believe we have even more opportunities, and we will meet those challenges head-on and overcome them," Morgan said at the shareholders meeting.
The share price has more than doubled since Morgan took over -- jumping from $2.32 a share Jan. 15.
MGL's announcement about its plans for Krispy Kreme didn't appear to register on Wall Street.
MGL's offer is worth $2.26 a share more than Krispy Kreme's closing price of $4.99 yesterday. If a legitimate offer, it could represent the first public bid to buy Krispy Kreme since its financial struggles began in 2004.
Brian Little, a spokesman for Krispy Kreme, said that "it is company policy not to comment on these kinds of matters."
MGL said it plans to finance the Krispy Kreme deal with a combination of debt and equity through a syndication once final terms for a deal are reached.
Guess said in his initial statement that he plans to have Krispy Kreme remain a publicly traded company. It would "issue a new class of stock to selling shareholders that will be nonvoting, but give them the potential to experience upside in the company over time."
According to the lawsuit filed April 2 against Mario Guess and Ligna by Portales Place Property LLC of Scottsdale, Ariz., Guess is accused of holding "Ligna out as a sophisticated private-equity investment firm that routinely made loans of between $25 million and $1 billion."
Guess and Ligna are being sued for breach of contract, fraud, unfair and deceptive trade practices, civil conspiracy and racketeering.
Portales said it paid Ligna a $375,000 deposit toward a below-market interest rate and other favorable loan terms for a $42 million loan for a real-estate project.
"In fact, Ligna is a sham business and Guess is a 23-year-old high-school graduate who has been found guilty of writing worthless checks, charged with obtaining property under false pretenses, a defendant in more than 10 civil actions in N.C. state courts, and evicted from leased premises for nonpayment of rent" in five counties, including Forsyth, the lawsuit alleges.
A later disclosure in the case found that Guess has just more than $10,000 in assets.
Three of Guess' attorneys were dismissed in May. Guess has filed a countersuit against Portales.
■ Richard Craver can be reached at 727-7376 or at rcraver@wsjournal.com.
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