Some Mergers Fall Apart : Many Firms Resume Buying Stock

The number of corporations buying back stock swelled on Wednesday as the stock market continued to recover from Monday’s nose-dive.

Lockheed, TRW, Atari, Bristol Myers and Dayton Hudson were among the dozens of corporations that announced plans to repurchase a large number of shares at prices considered low despite an overall gain Wednesday in most stock prices.

With share prices still depressed, some firms, including MTM Entertainment and Borden Inc., postponed plans to issue new securities, according to market sources. But few companies said they were changing their business plans in reaction to the market.

“You aren’t going to turn off a highway program because the stock market went down one day,” said Bethlehem Steel spokesman Henry Von Spreckelsen, in a reaction that was typical of many businesses Wednesday. “We just don’t see anything now that will affect steel. It’s too soon to make changes based on two days’ performance.”

However, there was evidence that the slide in share prices may have made at least one firm more attractive to corporate raiders. Chi-Chi’s, a Louisville, Ky. restaurant chain, said it rejected an unsolicited leveraged buyout offer Wednesday and was going ahead with plans to buy back up to 25% of its shares.

Meanwhile, New York investor Asher B. Edelman said he was continuing his pursuit of Telex, even though his $65-a-share offer was significantly higher than the Tulsa, Okla., firm’s market price, which closed up $9.25 at $43.50 Wednesday. “My financing is secure,” said Edelman, who said he had commitments from the New York investment firm Shearson Lehman Bros. Telex on Wednesday said its board was unable to make a recommendation on Edelman’s offer to shareholders.

Edelman’s offer was one of the few major financial transactions that remained on the table after Monday’s stock market plunge. On Wednesday, Hawaiian Airlines said its $98-million merger with Hemmeter Investment Corp. of Honolulu fell apart due to market conditions. As previously reported, Trans World Airlines Chairman Carl C. Icahn withdrew his offer to take the airline private Tuesday, but said Wednesday that he might purchase TWA shares.

A spokesman for MTM Entertainment, which is 34.3% owned by actress Mary Tyler Moore, said it was postponing an initial public offering of 4 million shares until market conditions improved. The spokesman said, however, that the Studio City-based studio had enough cash to go ahead with its projects for the next year, without the stock sale.

The stock repurchase programs announced by corporations gave the market a psychological boost, even though few firms were actively buying shares, said Larry Wachtel, a market analyst with Prudential-Bache Securities in New York. Wachtel dismissed a notion that corporations planned to repurchase shares not for investments but to shore up share prices. “The market is just too big for them to have that kind of impact,” he said.

Marshall S. Geller, managing director of the Los Angeles office of Bear, Stearns & Co., said the large number of companies buying back their own shares has been a key factor in stemming the downturn and he praised their efforts. But he also cautioned that there are some potential negative effects.

“It could be very short-term bullish and long-term negative,” Geller said. “Some of these companies may be strapped for cash in the future if there is a recession.” Meanwhile, bond traders said that many firms went ahead with plans to issue new debt securities, which were readily purchased by investors. According to syndicate officials, the only large debt issue delayed Wednesday was a $250-million offering by Borden. A spokesman for the New York-based dairy and chemical concern said debt wasn’t sold Wednesday because of uncertainty in the market.

Many corporate spokesman said their economic outlook hadn’t changed despite the market’s performance this week. Digital Equipment Corp. spokesman Mark Steinkrauss said the Maynard, Mass., computer maker’s executives were “poised to change if they have to,” but he said the firm’s customers hadn’t reacted by canceling orders, for example.

“It’s unusual to see a knee-jerk reaction from these customers based on two days’ performance of the stock market,” he said.

Purveyors of consumer goods said the decline in share prices affected sales somewhat. Dana R. Martin, president of Martin Cadillac in West Los Angeles, said traffic in his West Los Angeles showroom fell off noticeably as early as last Friday’s drop. “It was really quiet in the showroom on Monday,” Martin said, “but with the up-tick in the market Tuesday and today, traffic’s picking up again. People seem to be getting a bit more confident.”

Russ Solomon, president of Sacramento-based Tower Records, reported no change in consumer behavior at the company’s chain of record stores, but he blamed the stock market for the lost sale of a $5,000 painting at the company’s new sales gallery in Sherman Oaks. “The customer said that he would have bought it last week, but couldn’t this week because the stock market caved in on him.”

--Staff writers Douglas Frantz, Bruce Keppel and Carla Lazzareschi contributed to this report.