LeBow to Gain Control, Merge Western Union

A New York investor will acquire control of Western Union for $25 million in cash and combine it with an international telex operation he will buy from ITT Corp., it was announced Thursday.

The plan engineered by Bennett S. LeBow is designed to rescue Western Union, the nation’s oldest telecommunications company, which lost $556 million last year and has been struggling to avoid bankruptcy.

LeBow’s plan differs from previous rescue plans because it would keep Western Union in telecommunications instead of converting it into a financial services company.

Western Union’s stock rose sharply on the news, climbing $1.75 a share to close at $5.25 a share on the New York Stock Exchange.

But one analyst said the value of the deal to owners of common stock remained unclear because of Western Union’s heavy obligations to bond holders, owners of preferred stock and banks, all of which take precedence.

“I still think for the basic common shareholder, I don’t see a lot of the benefit,” said Geoff Johnson, an analyst for Argus Research.

In a statement, LeBow said he hoped that merging Western Union’s primarily domestic telex service with ITT’s international telex service would produce increased cash and allow the company to expand its worldwide business of electronic messaging.

LeBow owns Liggett Group, the parent of Liggett & Myers Tobacco, and is the majority shareholder in MAI Basic Four, a public company that makes business computers.

The deal was agreed to by ITT, Western Union executives and another group of investors that had a pending agreement to take control of Western Union. It still requires the approval of Western Union shareholders and regulators and the acceptance of exchange offers by the holders of at least 85% of the outstanding public debt.

A group headed by Pacific Asset Holdings L.P., a Beverly Hills-based investment partnership, and M.D.C. Holdings, a Denver home builder, was credited with bringing LeBow into the deal.

The Pacific Asset group largely stepped aside, although it retained an option to require some of LeBow’s stock.