Kidde Inc. May Restructure or Sell Off Assets : Owner of Weber Aircraft in Burbank Says Talks With 2 Firms Under Way
Kidde Inc., the vast conglomerate that owns Weber Aircraft in Burbank as well as such widely known companies as Jacuzzi water pumps and Farberware cookery, said Tuesday that it is considering restructuring or selling off some or all of its assets.
In a brief statement, Kidde Chairman Fred R. Sullivan said the company is holding talks with two companies and has received inquiries from others. Kidde’s board of directors met Tuesday to discuss its options, the statement said.
The announcement lifted Kidde’s stock $9.875 a share to $61.375 in composite trading on the New York Stock Exchange. Volume was a heavy 2.55 million shares. Also buoyed by the news was the stock of Teledyne, which owns an 18% stake in the company. Teledyne shares rose $18 a share to $356 on the NYSE.
Since the early 1960s, Sullivan has built Kidde from a maker of home fire extinguishers to a diversified manufacturer that has about 100 separate operating units and last year reported sales of $2.35 billion. Among other businesses, Kidde sells toys, camping and billiard equipment; a wide range of fire and security products; furnishes guards and temporary employees, and manufactures a range of products for offices and the automotive, defense and trucking industries.
Weber is the nation’s largest maker of aircraft cabin equipment.
Three years ago, Kidde was hard hit by the collapse in energy prices, which cut by half the sales of Grove Crane, its large hydraulic crane manufacturer, said Carol Neves, analyst with Merrill Lynch Research in New York. Kidde’s net income fell to $47.7 million in 1985 from $79.1 million in 1984. Last year, profit was $52 million.
Kidde cut back its overhead after the sharp decline in earnings, but some observers said the cutbacks came too late and were poorly managed, according to Cary E. Tharp Jr., an analyst with the H. G. Wellington investment firm in New York. “Sullivan has always run the place the way he’s wanted it, but lately that hasn’t worked as well as before,” Tharp said.
Investors’ lack of interest in the company has been reflected in a stock price that has hovered in the mid-$30 range, which Merrill Lynch’s Neves said was “substantially” below what the company could raise if it sold its assets piecemeal.
In recent weeks, however, the stock has drifted higher in expectation that Sullivan would take some step to dramatically lift the value of Kidde’s shares. A dramatic move has been expected in part because of the firm’s depressed earnings prospects and also because observers expect Sullivan, who turns 73 this summer, to retire shortly.
Sullivan holds about 3% of the company’s stock, while other insiders own a little more than 1%.
Neves said she had expected Sullivan to try to raise the shares’ value with a large stock repurchase that would be funded with the sale of assets or borrowings.
In December, 1985, Kidde sold off its building supply and banking equipment operation for about $300 million. “That might have been the first part of Sullivan’s plan to increase the shares’ value,” Neves said.
Some analysts said the company could be sold in pieces to a number of firms that already have businesses in the same industries in which Kidde operates. But some said the company is more likely to be sold to a firm that would purchase the entire company, intending to immediately begin selling off assets for a quicker return.
Standard & Poor’s, responding to the Kidde announcement, said it had placed $395 million in Kidde debt and $43 million in preferred stock on its “creditwatch” surveillance list. The debt-rating firm said that “a restructuring in the form of major asset sales, accompanied by material common share repurchases or dividends, would impair credit quality, potentially to a very significant extent.”
