N.J. Investment Firm Bids $318 Million for Whittaker; L.A. Company Cool to Offer

Whittaker Corp., the Los Angeles conglomerate with a reputation for repeated changes of direction, said Monday that a New Jersey investment firm has offered to take it over in a deal worth about $318 million.

The bid by Caiola Associates of $47.50 per share comes as Whittaker has been seeking to reap the full rewards of its latest strategy of focusing on specialty chemicals and technology products for the defense, aerospace and automotive industries.

The Mountainside, N.J., investment firm said it already owns 4.9% of Whittaker’s 6.7 million common shares.

Whittaker’s stock spurted on the news by $6.625 a share to close at $41.50 in New York Stock Exchange trading. Some analysts noted that the closing price remained $6 below Caiola’s offer, suggesting investor restraint so far.

Whittaker responded with a low-key, three-sentence acknowledgment of the offer. Chairman and Chief Executive Joseph F. Alibrandi said merely that Caiola’s offer would be reviewed by the Whittaker board “in mid-November at its next regularly scheduled meeting.”

Neither side would discuss details of the offer, which Whittaker characterized as “highly conditional”--a phrase it declined to explain.

Caiola Associates was formed by Louis K. Caiola, according to Norman Phipps, a vice president who handles mergers and acquisitions for the New York office of Wood Gundy Corp., the Canadian investment bank developing Caiola’s bid.

Phipps said Caiola formerly headed Tuscan Industries, a private processor of dairy products in Union, N.J. Caiola developed the company into a business with sales in the “several hundred millions of dollars” by 1986, when he sold it in a private transaction, Phipps said. He described Caiola as a skilled manager to whom “the opportunity to operate a company like Whittaker is exciting.”

Surprised by Reply

Whittaker’s almost offhand response to the offer came as something of a surprise to Caiola, Phipps said. “We were all mildly surprised to see Mr. Alibrandi’s response,” he said, “but the stock responded with more enthusiasm.”

Two West Coast analysts familiar with Whittaker were impressed by the offer of $47.50 a share. “I think it’s a hell of a price,” said Robert Hanisee, president of Seidler Amdec Securities in Los Angeles. “I can’t make heads or tails of Whittaker’s response.”

Larry Selwitz, who follows Whittaker for the Newport Beach investment banking firm of Cruttenden & Co., said Caiola’s initiative could prompt Alibrandi and other Whittaker executives to develop a competing bid.

“My thesis,” Selwitz said, “has been that as long as nobody makes an offer, Whittaker doesn’t have to do anything. But if somebody made an attempt,” he added, “I would expect the company to come in with a better offer”--a reference to the possibility of a debt-financed buyout by management. “I can’t imagine management letting this company get away.” Only 7% of Whittaker’s shares are now owned by its executives.

The buyout-induced activity in Whittaker’s stock marked the third time this year that the generally somnolent shares have been brought to life.

Fewer Shares Out

Twice--in March and September--Whittaker’s stock price rose in response to speculation that management might take the company private by buying back the outstanding shares and removing the stock from public trading.

In an interview with Financial World magazine published in October, Alibrandi acknowledged that he has considered taking the company private.

But he indicated a preference for staying the course, having the company make some small acquisitions and lifting corporate earnings by 15% a year. Declaring that he has the full support of Whittaker’s board, he told Financial World that shareholders would benefit more that way. “I’m patient,” he said.

Alibrandi has been taking the company at least somewhat private over the past few years as the company has sold discontinued operations and used the proceeds to buy up nearly half of its outstanding shares--leaving only the 6.7 million shares on the market.

At the same time, he has sold off the last of Whittaker’s health industry interests, which at one time included operating hospitals and clinics in Saudi Arabia, producing medical products and running a network of health maintenance organizations in this country.

Both the Saudi Arabia operations and the HMOs were once trumpeted as major strategic thrusts only to be abandoned later as costly misadventures.

When Whittaker in August, 1986, announced that it was unloading health-care and other operations that accounted for nearly two-thirds of its sales, it seemed to mark yet another sudden turnabout for the company. In May of that year, Alibrandi had maintained that health care, which he called “life sciences,” would continue to be one of Whittaker’s “core businesses.”

Alibrandi’s goal since then has been to create a smaller but more profitable firm. So far, analysts complain, it is only smaller.

Major Changes

Today’s Whittaker is made up of just two divisions--specialty chemicals, including adhesives, and technology products for customers in the defense, aerospace and automotive industries.

That is a far cry from the company Alibrandi joined 18 years ago, when Whittaker also produced fashion fabrics, built railroad cars, made lawn furniture and manufactured mining equipment. It also had interests in commercial printing and the concrete business--and was almost sinking under its debts.

The company reported a $36-million profit last year on sales of $427 million--including a one-time $23.3-million gain from the sale of discontinued operations.

For the nine months ending July 31, Whittaker reported a profit of $15.2 million on sales of $364.5 million, compared to a $28.2-million profit for the same period last year on sales of $312.1 million.