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ITT’s Housecleaning Expected To Be Focus of Meeting

May 16, 1985

NEW YORK (AP) _ ITT Corp. braced to find out today whether its shareholders are remaining patient with the company’s effort to streamline its operations and bolster its sagging earnings.

ITT, which was holding its annual meeting in Savannah, Ga., expected some disgruntled stockholders to complain that management has moved too slowly to enhance the value of their investments.

Under the leadership of chairman and chief executive Rand V. Araskog, ITT has reversed the acquisition drive of Araskog’s predecessor, Harold Geneen, who built New York-based ITT into one of the world’s biggest conglomerates.

Araskog wants ITT to divest assets not linked to those operations he believes have the strongest potential: telecommunications, other high- technology, and insurance and lodging services.

Many sales have already taken place. Last year, for example, ITT sold Continental Baking Co. to Ralston Purina Co. for $475 million.

But ITT announced its boldest move yet in January - a plan to divest a host of units valued at more than $1.7 billion, primarily in the natural resources and industrial sectors.

Since then, ITT has sold, or has secured agreements to sell, some of those units. In April it sold its publishing group to Macmillan Inc. for $75 million and reached a tenative agreement to sell 12 industrial companies to the investment firm of Forstmann, Little & Co. for about $370 million.

Those sales and other actions - such as ITT’s slashing of its dividend by 64 percent last summer - were aimed at strengthening ITT’s debt-laden balance sheet, improving its profitability and providing the hefty cash outlay needed for the company’s assault on the U.S. telecommunications market.

But the actions had their side effects.

When ITT cut its quarterly dividend to 25 cents a share from 69 cents, its common stock plunged from $31 a share to $21.121/2 in one day. But the stock recovered - it closed Wednesday at $34.621/2 - in part because of widespread rumors on Wall Street that some active investors were buying into ITT with a mind toward changing the company themselves.

Much of the speculation centered on financier Irwin L. Jacobs of Minneapolis. Jacobs acknowledged buying a ″substantial number″ of ITT’s 139.7 million common shares outstanding, although he stayed below the 5 percent ownership threshold that would require him to report the holding to the Securities and Exchange Commission.

But Jacobs, rather than making overtures suggesting a takeover of ITT, mainly criticized ITT’s management for not moving quickly enough with its divestiture program.

Jacobs suggested to ITT that it spin off some of the assets ITT wanted to keep - such as the Hartford Insurance Group and Sheraton Corp., the hotel chain - to benefit ITT’s stockholders. ITT rebuffed the suggestions.

But regardless of Jacobs’ complaints, ITT has plenty of internal problems to overcome.

Its debt of nearly $4 billion continues draining the company’s profits, which last year tumbled 34 percent to $448 million from $674.5 million in 1984. ITT’s return on stockholders’ equity was 7.4 percent last year, compared with the median return for the Fortune 500 of 13.6 percent.

In addition, ITT’s strategy for being a global telecommunications power calls for it to be a major provider of sophisticated telephone-switching equipment, called PBXs, in the United States.

ITT’s premier PBX, the System 12, has sold well overseas but the investment required for the product to compete in the U.S. market against such rivals as American Telephone & Telegraph Co. and Northern Telecom Ltd. will total an estimated $1 billion at least.

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