Beatrice Cos. Puts 4 Units Up for Sale : Divestiture Includes Avis, Danskin, Pennaco, Jensen
Beatrice Cos. said Tuesday that it is selling four businesses, including its Avis rental car and Danskin bodywear units, as part of an ongoing restructuring designed to turn the Chicago-based company into “the premier worldwide marketer of food and consumer products.”
William W. Granger Jr., Beatrice chairman and chief executive, said in a statement that a “thorough review” of Beatrice’s businesses led the company to determine that “shareholder value will be enhanced most” by selling Avis Inc., the nation’s second-largest car rental firm; Danskin, which manufactures and retails leotards, tights, leg warmers and other bodywear; Pennaco Hosiery, maker of Givenchy and Round the Clock hosiery, and International Jensen, which produces car stereos and audio speakers.
Variety of Products
“It is clear that these operations either don’t fit our long-term focus on food and consumer products or will not meet our financial performance requirements,” Granger said. Beatrice’s other operations span the gamut of food and consumer products--including La Choy, Rosarita and Wesson foods items, Platex, Almay cosmetics, Samsonite luggage, Stiffel lamps and bottling Coca-Cola in some parts of the West and Midwest.
Beatrice spokeswoman Patricia Brozowski declined to discuss whether the company has lined up buyers for the businesses or what price they expect for Avis, Danskin, Pennaco and International Jensen.
Beatrice said it will consider selling the Avis operation as a whole or in parts. Avis Inc.’s three operations are Avis Rent-a-Car U.S., Avis Rent-a-Car International and Avis Leasing.
The four units up for sale represent combined annualized sales of about $1.1 billion. Beatrice reported income of $479 million on revenue of $2.6 billion for the fiscal year ended Feb. 28, 1985.
For the six months ended Aug. 31, Avis alone contributed $85 million in earnings and $503 million in sales to Beatrice’s total net earnings of $128 million and revenue of $6.2 billion. Separate financial information wasn’t available on the other units, Brozowski said.
Wall Street reacted enthusiastically to a combination of the divestiture announcement and rumors that Beatrice may be a takeover target. Beatrice’s stock topped the New York Stock Exchange’s most active list with 4.7 million shares changing hands. The stock price rose $1.375 to close at $38.875.
The four businesses slated for divestiture were acquired when Beatrice bought Esmark in August, 1984, for $2.7 billion. Since that time, Beatrice has raised $1.9 billion by selling various operations.
Proceeds from the divestitures, along with money received from a recent stock offering and other financial transactions, are being used to pay some of Beatrice’s huge debt, the company said.
“The intent is to return the company to its historical financial strength,” Granger said.
As of Aug. 31, Beatrice had $2.5 billion in short- and long-term debt, compared to $4 billion shortly after the Esmark acquisition, Brozowski said. The company anticipates a debt-to-equity ratio of about 30% when the current fiscal year ends Feb. 28, 1986, compared to 70% in February, 1985.
Analysts said that more divestitures had been expected.
But the sale of Avis is important because it signals “somewhat of a narrowing of the corporate strategy to packaged goods,” said John Bierbusse, an analyst with the Duff & Phelps securities firm in Chicago. “It’s a less expansive definition of their corporate purpose.”
Stanley H. Fishman, an analyst with Fahnestock & Co. in New York, said: “I think they’re doing a smart thing. When they bought Esmark, it was evident that lots of Esmark would be going if only to pay for the acquisition.
“A leaner and stronger Beatrice is in the works,” he said.
Beatrice apparently waited to sell Avis until the car rental market had strengthened, Fishman said, “so I would expect that they’re selling Avis near the top of the market. It’s a good business.”
Fishman said International Jensen is being sold because it no longer fits in the corporation, and Danskin “has not been the healthiest performer lately.”
Beatrice’s large debt hasn’t been the company’s only problem. The multinational has been beset by internal squabbles that led to the ouster in early August of Chief Executive James L. Dutt. Granger, 66, returned to the company after a year of retirement to take the top spot.
“There were management problems,” Fishman said. “People were leaving; people were getting annoyed; morale was low.
“I think this has come to a halt with the new management,” he said.
Analyst Bierbusse described Beatrice as being in “quite a calming period” but added that “it’s important to realize that the company, even at the time of Jim Dutt’s departure, was very much on its way to meeting its divestiture goals.”
Beatrice has been rumored to be a takeover target, sparking heavy trading in the company’s stock. Beatrice’s Brozowski said that “we don’t comment on rumors and speculation.”
The subject of some rumors, Donald P. Kelly, former chairman of Esmark, told Dow Jones News Service that his investment firm is “not going to make a leveraged buy-out offer for Beatrice Cos. or for any other company.”
