GenCorp Drops Plans to Sell Aerojet Division
GenCorp Inc., citing environmental problems, said Monday that it no longer plans to sell its struggling Aerojet division, which employs 3,000 people in California.
The company, which announced efforts to shed the division last December, said the problems prevented GenCorp from getting a price that would provide its stockholders with “sufficient value versus other alternatives.”
GenCorp, based in Fairlawn, Ohio, did not disclose what price it sought. But industry sources said earlier this year that most aerospace firms had at least looked at acquiring Aerojet, which makes military electronics in Azusa and rocket motors in Sacramento.
Instead, Aerojet will try to bolster its operating performance with cost cutting and “strategic initiatives” such as teaming agreements with other aerospace firms, GenCorp said.
The environmental problems involve Aerojet’s potential liability for the cleanup of several sites where its plants are located. The exact liability isn’t yet known, but it’s likely to be in the tens of millions of dollars, GenCorp’s financial statements have indicated.
Wall Street clearly was disappointed that Aerojet did not sell.
After the announcement, GenCorp’s stock dropped $1 a share to $11.75 in New York Stock Exchange trading.
“It’s not surprising that they decided not to sell it, because I understand that the [offers] coming in were quite low,” said James Schmitt, president of Westcountry Financial, a securities research firm in Somis, Calif.
Aerojet’s sales and operating profits have fallen steadily in recent years in lock-step with cuts in defense and space programs.
For GenCorp’s fiscal year ended Nov. 30, Aerojet’s sales were $594 million, or 34% of GenCorp’s $1.74 billion in overall sales. GenCorp also makes auto parts, tennis balls, specialty plastics and wall coverings.
Aerojet’s pretax operating profit in fiscal 1994 was $25 million, or 23% of GenCorp’s total (excluding one-time gains and losses), down from $75 million, or 68% of the total three years earlier.
