Zenith Corp. Selling Computer Business to French Company
Zenith Electronics Corp. said today that it is selling its fast-growing computer group to the French company Groupe Bull to concentrate on consumer electronics, the weaker segment of its business.
Zenith is the last major U.S.-headquartered manufacturer of televisions, a business that has usually lost money for the company in recent years.
Zenith said in a statement that it expects the purchase price for the computer business to be less than $635 million, with the exact amount to be based on the net asset value of the computer business when the deal is closed, probably by the end of the year.
The deal is subject to shareholder and regulatory approval.
Sales of Glenview, Ill.-based Zenith’s computer systems and components expanded 23% to $1.6 billion last year contrasted to a 2.7% increase in consumer-electronics sales, which totaled $1.1 billion.
Large Amount of Debt
Despite its fast growth, Zenith Chairman Jerry K. Pearlman said the computer business is saddled with a large amount of debt that has restricted Zenith’s ability to realize the full potential of its consumer electronics division.
“Zenith will emerge as a conservatively financed company better prepared to capitalize on our strengths in consumer electronics,” Pearlman said in a statement.
Zenith said it will concentrate on “new consumer electronics and component technologies, particularly high-definition television and advanced high-resolution color displays.”
Zenith’s stock surged more than $2 a share, to $16.75 from Friday’s close of $14.50, in early trading today on the New York Stock Exchange. Pearlman estimated the book value of Zenith’s stock after the sale at $19 a share.
Charles Ryan, an analyst with Merrill Lynch & Co., said the deal represents good value for stockholders. He said that with the proceeds from the sale, Zenith could retire about $300 million of its debt load and invest heavily in emerging video technologies such as high-definition television and its own flat-mask video display, an industry standard.
Turned Profit Last Year
“This takes a company in the red that was becoming quite financially shaky into very sound financial condition,” Ryan said.
Zenith spokesman John Taylor said the company had $167 million in short-term debt and $309 million in long-term debt at the end of the second quarter.
Zenith turned a profit of $11.7 million last year--its first annual profit in four years--but had a net loss of $17 million for the first half of 1989.
The agreement marks the French company’s second acquisition of a U.S. computer maker. In 1987 it became the major shareholder of Honeywell Bull, which took over the $2-billion computer business of Honeywell Inc.
