Security Pacific May Buy Control Data Unit

Security Pacific Corp. said Thursday that it is negotiating to buy most of Commercial Credit Corp., the financial-services subsidiary of Control Data, in a deal that analysts say could be worth as much as $800 million.

If completed, the acquisition would be the largest ever for the Los Angeles-based parent of Security Pacific National Bank, said Vice Chairman William F. Ford, head of the banking firm’s negotiating team.

The deal also would more than double the assets of the banking firm’s fast-growing and highly profitable commercial and consumer finance and leasing operations, which now contribute nearly one-third of the firm’s profit. Besides finance and leasing, Commercial Credit also is engaged in insurance, real estate brokerage and other financial services.

No Firm Offer Yet

“This is a business we know and understand and operate very successfully,” Ford said. He added, however, that, although talks began last November, Security Pacific has not yet made a firm offer and that, because of the deal’s complexity, any possible agreement will probably not be reached until the fourth quarter of this year at the earliest.

Meanwhile, Control Data spokeswoman Susan Busch said the Minneapolis-based computer firm is “talking with a number of potential purchasers” interested in all or part of Baltimore-based Commercial Credit.

Control Data would not name the other parties, but analysts have mentioned International Business Machines, General Motors, Sears and J. C. Penney, as well as some large American, Japanese and European banks.

“Virtually anyone with financial wherewithal has been the subject of rumors” about acquiring the unit, said Michael Hamilton, an analyst for the brokerage firm of Piper, Jaffray & Hopwood in Minneapolis.

May Be Takeover Target

Control Data announced last November that it would seek buyers for the Commercial Credit unit so that it could concentrate on its once highly profitable computer and information-services businesses, troubled in recent months by increased foreign and domestic competition, export controls and other woes facing the U.S. computer industry.

Control Data also said it wants cash from the sale so that it can reduce debt and buy back some stock, possibly to help ward off unfriendly takeovers. The firm’s recent poor earnings have depressed its stock price and made it the subject of takeover rumors.

The price of Control Data shares rose $2 to $31.375 in heavy trading Thursday on the New York Stock Exchange. That compares to an estimated book value per share of $47.

Commercial Credit last year was Control Data’s most profitable unit, earning $49.6 million and enabling Control Data to report a $31.6-million profit on revenue of $5.02 billion.

However, the unit’s earnings dipped to $500,000 in the first quarter, compared to $9.1 million a year before, because of a write-off related to its exposure to the Ohio savings and loan crisis.

For Security Pacific, acquisition of Commercial Credit would represent another aggressive expansion of its commercial and consumer-finance operations, which are potentially more profitable than traditional bank lending.

When lending to less credit-worthy borrowers, finance companies generally charge higher interest rates and secure the loans with the borrowers’ facilities, equipment or receivables.

Since 1976, Security Pacific has bought a number of commercial and consumer-finance operations, helping the firm expand nationwide.

However, last year it lost out to Japan’s Fuji Bank in a bidding war for two consumer-finance subsidiaries of Walter E. Heller International. It also backed out of a possible $190-million deal to buy the equipment-finance arm of Allis-Chalmers.

Security Pacific’s Ford said the firm is negotiating to buy all of Commercial Credit’s finance and leasing operations, which carry assets of close to $6.5 billion. Security Pacific’s current finance and leasing operations have about $6 billion in assets.

However, because of regulations prohibiting banks from entering the insurance business, Security Pacific is not negotiating to buy Commercial Credit’s three insurance subsidiaries, Ford said. Nor is it seeking Commercial Credit’s real estate broker franchise network or its 21% interest in a securities brokerage business, he said.

Control Data Chairman William C. Norris said Wednesday at the firm’s annual meeting that he hopes to complete a deal for Commercial Credit by midyear and suggested that the company might take the unit off the market after that time if no deal had been reached.

However, Ford said the deal is too large and complex to complete so soon. Some analysts suggested that the banking firm might be trying to appear unhurried in order to get a lower price.

“Time is on their side rather than Control Data’s,” said Noel Delaney, a finance-company analyst with L. F. Rothschild, Unterberg, Towbin, noting the computer firm’s increasing vulnerability to a hostile takeover.

Separately, Control Data said it agreed to buy the California operations of BankAmerica Corp.’s Decimus Data Services unit. Terms were not disclosed.