Whittaker Goes Back to Roots in Aerospace : * Aviation: The Westwood-based firm sheds the last vestige of its days as a 100-company conglomerate.
Westwood-based Whittaker Corp. said Thursday that it will spin off its only remaining non-aerospace business, completing a full circle in its 50-year evolution from an aircraft parts maker to a 100-company conglomerate, and now back exclusively to equipment for things that fly.
Wall Street gave a vote of approval to its latest downsizing by sending the stock up to a 52-week high.
The company said it will spin off its biotechnology division, exchanging existing Whittaker Corp. shares for one share each of the biotech firm and of the aerospace firm. Whittaker’s shares closed up 62.5 cents at $20.375.
“This is pretty much the end” of Whittaker’s restructuring, said Edward Muller, vice president of the company. “There is no remnant of having been a conglomerate.”
In a presentation in New York on Thursday, Joseph F. Alibrandi, chairman and chief executive of Whittaker, told analysts: “Those of you who knew Whittaker in the past remember a company that grew very rapidly through the 1960s as one of the early large conglomerates. It is a much different company today.”
He said the company had reduced debt from $360 million in 1989, when it borrowed a large sum to finance restructuring, to $84.3 million now. According to a Value Line investment survey, the company’s sales are expected to recover to $205 million in 1991 from $188.5 million in 1990, with profits bouncing back to $14 million from $9.9 million last year. Back in its days as a large conglomerate, Whittaker’s sales ranged up to $1.7 billion.
Spinning off the biotech firm, Alibrandi said, would be good for shareholders and would “enable two disparate operations to grow independently, to their maximum extent and with minimum cost.”
Analysts expect investors will value the shares of the two separate companies more highly than those of the present conglomerate. They say the shares of the aerospace firm will probably trade around $8 to $10, and the biotech firm at $12 to $15, or up to 25% higher than current levels. Although the aerospace operations account for about 80% of revenues and profits compared to just 20% for the biotech division, higher growth prospects in biotech mean that those shares will probably be worth more.
In early August, looking ahead to the expected spinoff, analyst Robert Schwartzberg of Friedman, Billings, Ramsey & Co. wrote in a report that the aerospace division would probably trade at 10 to 11 times earnings and the biotech division around 20 to 21 times earnings.
The biotech spinoff follows the shedding of units including its specialty chemicals units in 1990 and a group of divisions including its health-care and metals units in 1986.
Whittaker Bioproducts, based in Walkersville, Md., is considered to have good prospects based on its diagnostic tests for Lyme disease and stomach cancer and its tissue-culture business. It has shown strong profit growth in recent years. In 1990, it showed a profit of $7.1 million on revenues of $33.3 million. Yesterday it announced that it was paying about $11.4 million to acquire 3M Diagnostic Systems, which had sales of $8 million in 1990.
Whittaker’s aerospace division, which has operations in North Hollywood and Simi Valley, is considered in relatively good shape compared to many ailing defense contractors. Its defense-related products include electronic surveillance systems and radar jamming equipment that are expected to see steady demand despite government cutbacks in defense spending. And the bulk of its sales are in commercial aerospace electronics, where demand remains strong. Sales last year were $155.2 million, and profits were $28.7 million.
Whittaker Returns to Its Roots
1942: Founded as manufacturer of aircraft valves.
1960s: Grows through acquisitions into 100-firm conglomerate including fabric, mining equipment, chemicals, printing, furniture, rolling stock, defense and automobile parts firms.
1973: Starts profitable business supplying health-care management to hospitals in the Middle East.
1984: Saudi Arabia does not renew its hospitals contract, shutting down Whittaker’s Middle East operations.
1986: Sells health-care, metals, marine and other operations accounting for two-thirds of sales.
1989-'90: Recapitalizes by borrowing $332 million and distributing $40 per share after rebuffing takeover bid by Caiola Associates. Sells technology and chemical divisions.
September, 1991: Returns to focus solely on aircraft equipment with plan to spin off biotech division. Debt before the spinoff has been reduced by divestitures to $84.3 million.
Source: Whittaker Corp.