USX Putting Its Transportation Units on Block : Analysts Say Deal Will Increase Flexibility
USX Corp. said Monday that it plans to sell its transportation businesses for more than $500 million to a joint venture it is forming with Blackstone Capital Partners and managers of the rail and water subsidiaries.
Industry analysts called the planned sale a good move for the oil and steel giant.
The deal would raise the total of USX asset sales to $5.5 billion since David M. Roderick became chairman in 1979. It also would pare USX’s wholly owned transportation businesses to the petroleum pipelines and oceangoing tankers of its Marathon Oil and Texas Oil & Gas subsidiaries.
Roderick has said USX intends to sell another $750 million in assets over the next year and a half.
The deal also would drain USX’s Diversified Group of its largest business segment, leaving realty, engineering and related consulting and several other small businesses.
“It’s a good approach,” said George Gaspar, an analyst with the investment firm Robert W. Baird & Co. in Milwaukee. “The company wants to disengage from the direct, wholly owned operations that support its steel operations.
Stock Unchanged
“The cash they’ll get will allow them more flexibility,” Gaspar said, adding that USX might use the proceeds from the sale to make an oil-related acquisition or repurchase its own stock.
In consolidated New York Stock Exchange trading, USX shares finished unchanged at $31.375.
Jeffrey Miller, an analyst with Duff & Phelps Inc. in Chicago, said of the sale, “It’s good for them to concentrate on the energy and the steel (segments).”
Miller suggested that USX use the cash from its asset sales to reduce its debt.
USX, based in Pittsburgh, signed a letter of intent with Blackstone, leaving a definitive agreement to be negotiated and regulatory approval, financing and USX board approval to be obtained, USX said.
The Blackstone Group was founded in 1985 by former Commerce Secretary Peter G. Peterson and Stephen A. Schwarzman, former head of mergers and acquisitions at Lehman Bros. Kuhn Loeb Inc., predecessor to Shearson Lehman Hutton Inc.
The deal covers all USX’s railroads: the Bessemer & Lake Erie; Birmingham Southern; Duluth, Missabe & Iron Range; Elgin, Joliet & Eastern; the Lake Terminal, and the Union Railroad.
Warrior & Gulf Navigation Co., the Pittsburgh & Conneaut Dock Co. and the USS Great Lakes Fleet Inc. also are included.
The subsidiaries employ about 4,000 people who operate about 300 locomotives and 20,000 rail cars.
