Whittaker Sells Stake in Smith International

Whittaker Corp. quietly sold off its entire 8.3% stake in Smith International last month for a fraction of what it had originally paid, the company disclosed Thursday in documents filed with the Securities and Exchange Commission.

Whittaker, a Los Angeles-based company that at one time had tried to buy a major interest in Smith, paid about $24 a share for its Smith stock in 1982.

Since then, the troubled Newport Beach oil-services company has suffered from a prolonged slump in the petroleum industry and from a protracted, unsuccessful battle to take over Gearhart Industries. Its stock has slumped also, and Whittaker’s 1.59 million shares were sold in open-market transactions on the New York Stock Exchange on Oct. 31 for only $7.50 each--a 70% decline in price. The $11.9 million that Whittaker received for the shares was $26.2 million less than it paid for the stock.

Whittaker officials could not be reached for comment. However, an analyst said the stock sale is consistent with the company’s program of getting rid of holdings that it believes are peripheral.

Larry Selwitz, a securities analyst with the investment firm of Bateman Eichler, Hill Richards in Los Angeles, said: “Their strategy is to concentrate on chemical coatings, health care and technology. If (an investment) doesn’t fall into one of those three areas, I expect that they will try to get out.”

Smith and Whittaker battled in late 1982, when Whittaker originally bought into Smith and announced that it would attempt to boost its share of the company to as high as 23%. But, after Smith executives vowed that they would “absolutely fight tooth-and-nail” any attempt to wrest control of Smith, the two companies reached a “standstill agreement” under which Whittaker would not buy more Smith stock.

Except for some piecemeal sales during 1983, Whittaker held on to the bulk of its Smith stock until the sale last week.

The agreement between them, which expired in July, also required Smith to nominate a Whittaker director to its board. Carl Hartnack, also a director of Security Pacific Corp., serves in that position, and a Smith spokeswoman said she did not foresee any change in his status.

“It seems like ancient history now,” remarked Val Maxey, the Smith spokeswoman, reflecting on the events that followed the successful conclusion of the agreement.

In Whittaker’s third fiscal quarter ended July 31, the company posted net income of $8.4 million, down from $9.9 million a year earlier. Revenue in the quarter fell to $288 million from $347 million the previous year.

In the third quarter ended Sept. 30, Smith lost $8.2 million, compared to net income of $3.6 million a year earlier. Revenue for the quarter fell to $175.4 million from $192.9 million a year earlier.