Dravo Sells Major Businesses
Dec. 18, 1987
PITTSBURGH (AP) _ Facing losses of more than $75 million this year and operating under new management, Dravo Corp. announced Friday it is selling its engineering, construction and energy businesses to concentrate on limestone mining and other quarrying.
More than 2,900 of Dravo's 5,503 employees could be affected by the sale of eight subsidiaries, said spokeswoman Karen E. Esch.
William G. Roth, who took over as Dravo's chairman and president in June, said the restructuring would cost $20 million to $30 million in the fourth quarter. The company posted a loss of $55.7 million, or $3.91 a share, for the first nine months of 1987.
Dravo called about 1,000 Pittsburgh-area employees to a meeting at the David L. Lawrence Convention Center early Friday before an afternoon news conference in New York City.
Roth said Westinghouse Electric Corp. of Pittsburgh will buy Dravo Energy Resources Inc. and Dravo Facilities Management, which recently have been hurt by cost overruns in the design, construction and operation of waste-to-energy plants. Westinghouse, however, said the agreement was not binding.
Jacobs Engineering Group Inc. of Pasadena, Calif., will buy Gibbs & Hill Inc. of New York, an engineering subsidiary; Dravo Engineering Companies Inc. of Pittsburgh and Atlanta; Dravo Constructors Inc. of Pittsburgh and Weyher- Livsey Constructors Inc. of Atlanta, construction companies.
The management of Dravo Automation Sciences, which provides integrated factory automation systems to the military and major companies such as USX Corp., has agreed to purchase the subsidiary, Roth said.
In addition, ''serious expressions of interest have been received'' for Dravo Wellman Co., a materials handling subsidiary, but its sale will be delayed ''until more urgent priorities could be addressed,'' the company said.
The timing and the terms of the sales were not announced.
Dravo said a portion of the 202 corporate employees could be affected by the restructuring.
Remaining would be Dravo Lime Co., which mines limestone for scrubbers in coal-fired power plants, and Dravo Basic Materials Co., which mines construction materials such as stone for highways. The two divisions together employ 1,698 workers.
Dravo also said it will purchase a limestone quarry near Smithland, Ky., and distribution facilities near Memphis, Tenn., and Baton Rouge, La., from Cyprus Minerals Co. The terms of the sales were not announced.
''We enjoy a real edge in our lime business, both technologically and in the quality and location of our reserves, and our experience in moving products by water contributes to our strong position in the supply of basic construction materials,'' Roth said.
He said mining operations ''are particularly suitable to expansion by acquisition.''
Dravo previously announced the sale of its barge, pipe fabrication and stevedoring businesses.
Dravo has been plagued through most of the 1980s by poor conditions in the engineering and construction fields.
The company lost $39 million between 1982 and 1984, but earned a profit of $3.2 million in 1985 and $34.9 million in 1986. It posted a third-quarter 1987 loss of $17.6 million, or $1.22 a share, on revenues of $175.2 million.
In contrast, the company posted a third-quarter 1986 profit of $31.6 million, or $2.23 a share, on revenues of $194.2 million.
Roth, formerly of American Standard Corp., was named chairman, president and chief executive officer on June 25, succeeding Thomas F. Faught Jr., who resigned Jan. 13 under pressure due to what Dravo said were irreconcilable differences with the board of directors on management style.
All employees took a pay cut of between 5 percent and 25 percent on Aug. 1 as part of a retrenchment following second-quarter losses. The program included suspension of corporate contributions to employee savings plans and a hiring freeze. The company announced in late November that the cuts, which were to be lifted Jan. 1, will continue for all senior managers into 1988.
On Nov. 2, a group led by Arthur M. Goldberg, a financier from Somerset, N.J., announced it may seek control of the company. Goldberg is chairman of International Controls Corp. of Boca Raton, Fla. Goldberg told the Securities and Exchange Commission that the group owned 6.5 percent of Dravo's outstanding common stock.
On Nov. 9, the New York brokerage firm of Shufro, Rose & Ehrman said it was holding 12.4 percent of Dravo's outstanding stock for clients it would not identify. Fred Ehrman, a general partner of the brokerage firm, said the stake was strictly for investment purposes, but he said the firm told the SEC it could change its objectives.
Analysts and Ehrman have said they feel the stock is undervalued. Some analysts have pegged the value of Dravo's natural resources unit at between $18 and $19 a share alone.
As recently as 1980, the company had about 14,000 employees, including about 4,500 in the Pittsburgh area.