Whittaker Plans Major Overhaul, Stock Buyback : Getting Out of 4 Lines of Business, May Repurchase Up to a Third of Its Shares

Whittaker Corp. will offer for sale operations that account for more than 60% of its revenue in a move to divest slow-growing units and sharpen the Los Angeles-based conglomerate’s focus.

Whittaker announced late Friday that it was getting out of its medical, metals, marine and material handling lines. The firm will concentrate on its defense electronics, aviation components and chemicals operations.

The company also is offering to buy back up to a third of its common stock and indicated that it may, depending on price, repurchase nearly half of its shares.

The move marks a strategic retreat from Whittaker’s venture into health care. Earlier this year, Whittaker agreed to sell its fledgling health maintenance organization network to Travelers Corp. for $34 million. Whittaker’s remaining health-care operations are primarily in the distribution of medical, surgical and laboratory products.

Redirect Its Energies

“We’ve been working on building the strength of the core of the company for years. The technology and chemical businesses, in terms of growth and from an earnings point of view, have clearly shown a consistent performance that constitutes a core on which to build for the future,” Joseph F. Alibrandi, Whittaker’s chairman and chief executive, said in an interview.

He said the asset sales would allow management to direct its energies to the company’s best prospects and will make the firm easier for investors and Wall Street analysts to understand.

Alibrandi said the company expects to receive “at least book value” for the units that are being put on the block.

Those units last year accounted for more than 60% of sales but less than 50% of profits. The technology and chemicals operations that Whittaker is keeping generated more than half of the company’s 1985 profit.

Lost Saudi Arabia Contract

Whittaker last year posted a net profit of $19.9 million on sales of $1.13 billion, down sharply from previous years, largely because of the ending of its lucrative health-care contracts with Saudi Arabia. In this year’s second quarter, the firm lost $4.5 million, largely because of a $12-million writeoff associated with an oil and gas venture.

The company also announced Friday that it will buy back as many as 4 million of its 12.9 million outstanding common shares. The move reflects an adjustment of its equity base to its new, smaller size, company officials said.

The firm will conduct an auction for the shares it is seeking, paying between $30 and $34 a share. The stock closed at $27.25 Friday in composite trading on the New York Stock Exchange.

The company said it “may select” a price that will allow it to buy up to 6 million shares.

Alibrandi said that after the asset sales, the remaining company will have annual sales of about $500 million. He said the proceeds from the sales would be used to finance the stock buyback but would also be available for possible selective acquisitions in technology or chemicals.

“We obviously don’t want to re-conglomerate. We would want anything we buy to fit very carefully into the operations we’re active in,” Alibrandi said.