Teledyne Plan to Spin Off Units Gets Boost From IRS
A Teledyne plan to spin off four insurance and finance subsidiaries has moved closer toward completion with an Internal Revenue Service ruling that the transaction would not be taxable, the Los Angeles-based conglomerate said Thursday.
Teledyne announced last June a plan to spin off those subsidiaries, slashing the size of the firm by more than 20%. The firm sought a ruling on the tax status of the transaction from the IRS and received word in recent days that the spinoff would not be taxable to shareholders, Teledyne spokesman Berkley Baker said.
The company had anticipated completing the deal in 1989, but the IRS decision was delayed, a spokesman said. The deal must still be approved by the Teledyne board and by some regulatory agencies, including state insurance commissioners, he said.
The four units that Teledyne would spin off--as one entity--are the United Insurance Co. of America, Trinity Universal Insurance Co., Financial Indemnity Co. and Fireside Thrift Co. Together, they accounted for $988.1 million in sales last year, 21.5% of the company’s revenue. They contributed 18.5% of Teledyne’s pretax income.
Teledyne disclosed the IRS approval after its shares jumped $7.875 in trading on the New York Stock Exchange Thursday, closing at $360.125.
Baker said the activity could be related to the IRS decision, as well as two other factors. The company said it expects its 1989 fiscal year results to be below analysts’ estimates as a result of having to add to the loss reserves at its casualty insurance companies.
And the company disclosed that it has sold Acoustic Research, a small stereo speaker manufacturer in Boston, to Jensen Inc. of Chicago.
Baker declined to comment on whether the spinoff of the insurance subsidiaries would have any effect on those subsidiaries holdings of 29% of common shares of Litton Industries.
