Whittaker Plans to Reorganize in Wake of Offer : Firm May Sell Chemicals Unit, Buy Back Stock and Take on More Debt

Whittaker Corp., apparently acting to discourage a takeover bid, Monday announced a complicated reorganization that involves taking on more debt, selling its coveted chemicals businesses and buying back its stock.

Los Angeles-based Whittaker, which rebuffed a $47.50-per-share offer from a New Jersey investor last October, said its board approved a plan under which shareholders, except senior management, would receive $40 for each share they own. They would also get one share in the smaller company that will result from the reorganization.

Analysts said Whittaker’s offer of cash and new stock is probably worth between $46 and $52 a share. In composite trading on the New York Stock Exchange, Whittaker’s shares closed Monday at $47, up $2.625.

In a statement, Whittaker said its proposal would give shareholders “substantial immediate value for their shares while retaining a significant ongoing interest in a company that will be restructured to concentrate on certain attractive high-technology businesses.”

‘Best Alternative’

Analysts said Whittaker’s actions appeared to be a response to the $322-million takeover bid for the company by Louis Caiola, a Mountainside, N.J., investor. Caiola, who disclosed last December that he owned 4.9% of the company, refused to comment on Whittaker’s announcement Monday.

“This is an opportunity for Whittaker to do something and end the suspense,” said Larry Selwitz, an analyst with the Cruttenden & Co. investment firm in Newport Beach. The company is less likely to be a takeover target now, he said, adding, “Shareholders still have an interest in Whittaker Corp. and (will get) a financial reward.”

Whittaker spokesman John K. Otto called the plan the company’s “best alternative.” He said the board had studied the sale of the company and other restructuring plans and had discussed options with “more than one” interested party.

“The board believes this plan is in the best interest of the shareholders,” he said. In connection with its plan, Whittaker said it is suspending the dividend on its common stock. Whittaker has been paying a 25-cent quarterly dividend.

The plan is the latest step in what analysts described as Whittaker’s drive to become a smaller, better-focused company. In 1985, Whittaker had $1.1 billion in sales, $20 million in profit and was involved in such far-flung enterprises as health care, metals and hydraulic equipment. The proposed sale of Whittaker’s various chemical subsidiaries and some of its technology companies would reduce its size to $200 million in yearly sales.

“They were giant, but they were unmanageable,” Selwitz said. After the reorganization, he said, Whittaker will be “more narrowly focused and under better control.”

Analysts said about half of the companies that will remain under Whittaker ownership are involved in defense work. The rest deal with commercial aircraft parts, adhesives and diagnostic medical equipment. Otto, the Whittaker spokesman, said the smaller company would be profitable.

Bulk of Firm’s Sales

Whittaker said the chemical units to be sold include Chemical Coatings Group, Park Chemicals, Ram Chemicals, Heico Chemicals and Duall-Wind/Anjac-Doron. The technology subsidiary up for sale include Yardney Battery Group, Southwest Metals, Winters Industries, Holex (Ordnance) and Water Management.

The units that are up for sale generate revenue of $294 million, or 59%, of the company’s annual sales.

Whittaker’s financial reorganization could place up to 25% of its new shares in the hands of its senior managers, who are taking stock instead of cash for their shares. According to one estimate, Whittaker Chairman Joseph F. Alibrandi could increase his stake in the firm to 12% from just under 1.5%.

“I think they felt all along that they wanted to keep control of their company,” said Robert Hanisee, an analyst with Seidler Amdec Securities in Los Angeles. “Instead of taking cash out of the company, they are taking a higher percentage of the company. That fits with their scenario.”

Whittaker said it had arranged for a $437.5-million credit line from Security Pacific National Bank, Citibank and First National Bank of Chicago to help finance its share repurchase and to refinance other debt. Analysts said Whittaker needed to borrow $280 million to repurchase the outstanding shares.

Besides announcing its financial reorganization, Whittaker reported its first-quarter earnings on Monday. The company said it earned $4.8 million on sales of $118.6 million for the first three months of 1989. That compares to income of $1.2 million on revenue of $110.8 million for the same period a year ago.

Still Some Conditions

Otto, the company spokesman, said last year’s earnings had been depressed by a $3.5-million pretax charge that resulted from the consolidation of two technology units. He said earnings this year were helped by increased chemicals sales.

Whittaker’s reorganization must be approved by its shareholders. Also, the company said its financing agreement with the banks depends on there being no adverse effect on the company from any government investigations.

The company previously disclosed that it expects to be criminally charged by the federal government in connection with payments made by employees of a subsidiary, Communications & Control Systems in Fayetteville, Ark., to a government employee. According to the company, Communications & Control Systems is now closed.