Borden to Sell Off Units in Bid to Revitalize : Restructuring: Divisions being shed provided company with 20% of its projected sales, or $1.25 billion, last year.
Borden Inc. said Wednesday that it is getting out of snack foods, jams and seafood in a much-anticipated restructuring that will lead to a dividend cut and $650 million in charges for the diversified foods giant.
Wall Street analysts generally praised the moves but also expressed disappointment, saying the company did not go far enough to turn itself around.
Investors evidently were even less impressed. Borden’s stock lost $2.375 to end at $15.875 on the New York Stock Exchange, as investors focused on the halved dividend and prospects for more losses.
“The goal of this program is to build shareholder value by focusing on and revitalizing our best businesses,” Borden Chairman Frank Tasco said in announcing the board’s approval of the restructuring.
Borden said it expects to report a 1993 loss of up to $600 million, which would be equal to $4.26 a share, including the $650 million in charges. Its annual dividend will be cut in half to 30 cents a share.
The company also said it expects 1994 earnings to be at the upper end of the range of the 75 cents to $1 a share estimated by analysts, and it forecast a marginally profitable first quarter.
Divisions being put up for sale include Wise potato chips, Jays, Seyferts’, Guy’s, Clover Club and, in Canada, Humpty Dumpty. It is also selling its seafood unit, which makes Snow’s and Doxsee clam products and Bama jams and jellies.
The company said the divisions being sold provided total revenue of $1.25 billion, or 20% of last year’s projected sales of $6.75 billion.
The decision to restructure the food and specialty chemical maker comes on the heels of the forced resignation in December of Chief Executive Anthony D’Amato.
At that time, Borden’s directors were also considering the sale of the entire company following a series of disappointing earnings. Borden’s stock climbed sharply in anticipation of a takeover, with Hanson speculated to be the likely buyer.
But the stock drifted lower as the company said it would not attempt a merger and instead would undergo its third restructuring since 1989 in another attempt to forge a more cohesive unit from its array of consumer and chemical products.
“There was nothing that was more dramatic or creative than had been anticipated by the market,” said Joanna Scharf at S.G. Warburg. “They’re doing the right things, but slowly.”
“It was a big disappointment for people who were buying the stock even yesterday for a takeover,” said Nomi Ghez, an analyst with Goldman Sachs. “Clearly, there is no takeover.”
In a statement, the company said the latest cost reductions, which will be phased in over two years, will produce savings of $100 million to $125 million by 1995.
Borden said the restructuring plan will be carried out by Ervin Shames, who was named president and chief executive in December. He was formerly on the marketing and corporate planning team of Kraft General Foods.
The company said it will focus on developing its pasta and sauce units, niche grocery and international foods.
“Borden historically has not put sufficient investment behind the many good brands we do have,” Shames told analysts in a conference call.
“Borden’s key niche brands, such as Cracker Jack candied popcorn and peanuts, ReaLemon lemon juice, Wyler’s bouillon and Eagle Brand sweetened condensed milk, have strong shares but historically have been under-marketed,” he said.
The company’s other products include Elmer’s and Krazy Glue adhesives.
