Westinghouse Leaving Credit Business, Selling Other Units With BC-Westinghouse-Glance and
Westinghouse Leaving Credit Business, Selling Other Units With BC-Westinghouse-Glance and AM-Westinghouse-Pieces
PITTSBURGH (AP) _ Westinghouse Electric Corp., hobbled by its deteriorating credit unit, said Monday it would liquidate the division and sell four of its peripheral businesses.
Westinghouse said the move would reduce its after-tax earnings by $1.13 billion in the fourth quarter. The company also said it would lower the annual dividend on its common stock to 40 cents next year from 72 cents, reflecting the reduced earnings base of its remaining businesses.
But analysts applauded the moves and investors bid the price of Westinghouse stock up a sharp $2.37 1/2 a share to $12.12 1/2 on the New York Stock Exchange. Wall Street believed Westinghouse earnings would improve once the laggard businesses were jettisoned. In addition to the credit unit, Westinghouse said it is selling its money-losing Knoll office furniture business; its distribution and control unit, which makes electrical products for heavy industry and construction; Westinghouse Electric Supply Co., an electrical products distributor; and Westinghouse Communities, a real estate business.
Westinghouse said earlier this month it was considering selling or liquidating the credit unit and selling other businesses.
Chairman Paul E. Lego said Monday the company will focus on three technology-based businesses - electronic systems, environmental systems and power systems - and its transport temperature control and broadcasting operations.
″This comprehensive plan enables us to put our financial services problem behind us and sets the stage for Westinghouse to grow profitably in markets where we are a strong worldwide competitor,″ Lego said.
Lego said the plan will raise enough money to retire all of the credit unit’s more than $6 billion debt. In the last year, Westinghouse has taken more than $2.8 billion in charges against bad real estate and corporate finance loans in the credit division’s portfolio.
The company lost $110 million through the first nine months of this year, largely due to the credit unit.
Analysts said the moves, though painful in the short-term, may finally enable the company to move past the credit division’s real estate nightmare.
″It’s clearly good news,″ said Greg Drahuschak of Janney Montgomery Scott Inc. in Pittsburgh. ″They’re lancing a boil.″
Kemp Fuller Jr., vice president with RAS Securities in New York, said he was ecstatic the company was selling the non-strategic units.
″They are focusing on the businesses that are the most productive,″ he said. ″It will improve the picture for Westinghouse.″
Westinghouse said it has no immediate plans to lay off workers. The credit unit employs about 600 people, mostly in Pittsburgh, and the four businesses being sold employ about 22,000 of the company’s 110,000 employees worldwide.
Judy Meehan, an analyst at Parker-Hunter Inc. in Pittsburgh, said the plan’s success will depend on the company’s ability to sell the credit unit’s assets and the four businesses at good prices.
″Who’s going to buy all this stuff?″ she said.
Westinghouse has been negotiating the sale of the credit unit’s assets with various potential buyers. A company spokesman declined to comment on whether any prospective buyers have surfaced for the four units.
Moody’s Investor Service Inc. recently lowered its debt rating for the company and the credit subsidiary a day later.
Westinghouse will sell the credit unit’s assets as quickly as possible, probably within the next few years, said spokesman Ronald E. Hart. The company had planned to reduce the size of the unit over five years.
The reorganization is designed to focus on business units instead of groups and includes the creation of a policy-making management committee that will include Lego.
The company, founded by inventor George Westinghouse in 1886, originally made transformers used to distribute electric power. The company’s ventures into other businesses spanned the next century, including the founding of the broadcasting unit in 1920.