Allied-Signal Says Merger Costs Will Cause ’85 Loss

Citing greater-than-anticipated expenses from its recently completed merger, Allied-Signal said Tuesday that it expects to take a charge of up to $700 million in the fourth quarter, thus giving it a loss for the year ended Dec. 31.

The Morristown, N.J.-based company did not estimate the size of the loss that it will report. It had a profit of $785 million, or $3.11 per share, for 1984.

Allied-Signal had previously suggested that it might earn a $4-per-share profit for last year, and some industry analysts had predicted that write-offs would not cause a loss for the company, which was formed last September by the merger of Allied Corp. and La Jolla-based Signal Cos.

The huge charge results from post-merger, companywide restructuring and costs generated by early retirement programs and the spinoff of 30 businesses to be run from San Diego by former Signal President Michael Dingman, according to Chairman Edward L. Hennessy Jr.

Hennessy told Dow Jones New Service on Tuesday that Allied-Signal’s decision to absorb the charges during 1985 would likely mean that the company won’t face similar charges during 1986. “I don’t want to have to take any more special charges,” he said.

Hennessy linked about $300 million of the charge to write-downs generated by Allied-Signal’s decision to sell several units. Another $200 million was generated by job cutbacks and facility consolidations.

The company anticipates at least $100 million in write-downs related to the 30 Signal and Allied business units that will be spun off to Henley Group, the soon-to-be-created company that Dingman will run.