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Westinghouse May Sell Refrigeration, Other Businesses To Pay For CBS

August 2, 1995

PITTSBURGH (AP) _ Westinghouse Electric Corp. won’t sell its Group W broadcasting operations to pay for its acquisition of CBS Inc., but almost any of its other businesses could go on the auction block, analysts predicted Wednesday.

Westinghouse Chairman Michael Jordan said Tuesday that the industrial conglomerate will have to sell up to $2 billion in assets to pay for the $5.4 billion deal. Neither he nor Westinghouse spokesman Roy Morrow would say which businesses are likely to go.

Analysts said the industrial conglomerate is most likely to sell Minneapolis-based Thermo-King, which makes refrigeration equipment for the transportation industry.

The business had operating profits of $130 million on sales of $877 million in 1994. It could fetch $800 million and $1 billion, said Richard Sporrer, an analyst with Parker-Hunter, a regional investment bank and brokerage firm.

He called Thermo-King a ``stand-alone″ business whose sale would not disrupt Westinghouse’s overall operations.

The Knoll Group, Westinghouse’s office furniture subsidiary, also could be sold, since it is not central to the corporation’s core high-technology and energy-related businesses. However, analysts said, now may not be the ideal time to sell the company, which is based in Greenville, Pa.

Knoll, which lost $68 million on sales of $567 million in 1994, was taken off the block until its results improve.

If Westinghouse chooses to divest businesses from its industrial core, the Power Generation subsidiary would be a strong candidate for a sale, analysts said.

They pointed out that the company, based in Orlando, Fla., could fetch a healthy price because it is solidly profitable and has reasonable prospects for growth. The Power Generation subsidiary, which makes and services equipment for turbine power plants, had operating profits of $110 million on sales of $1.7 billion in 1994.

Westinghouse has a strong foothold in the quickly expanding East Asian power generation market, according to Greg Drahuschak, a Pittsburgh-based analyst at Janney, Montgomery and Scott.

He said, however, that the prospects for profit may discourage the company from selling the unit. ``If you waited and waited it out for a year or two, it could yield a lot more than you’d get by selling it off now,″ Drahuschak said.

Both Drahuschak and Kemp Fuller Jr., an independent New York-based analyst, said sales are not likely to occur until 1996. Fuller argued it would be unwise for Westinghouse to sell key business units until it becomes clear that the deal, which is still subject to approval by federal regulators and CBS shareholders, will actually go through.

And Drahuschak said Jordan may have to accept bargain-basement prices for his business units if he rushes to sell. He said Westinghouse may obtain more money by selling the units slowly.

Jordan needs to get top dollar for whatever he sells. Westinghouse had $3.5 billion in net debt prior to the announcement of the acquisition. The $2 billion Westinghouse is borrowing from Chemical Bank and J.P. Morgan to finance the deal boosts their debt to $5.5 billion.

The prospects for additional debt have some analysts worried. The Fitch Financial Wire said Wednesday that Westinghouse’s credit quality may suffer as it is forced to borrow to pay for the purchase. z

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