TRW Near Sale of Information Services Unit
TRW Inc. is deep into negotiations to sell its Information Systems & Services subsidiary here to a Boston investors group for an estimated $1 billion.
A major Orange County employer, the TRW information unit is best known for its consumer credit reports. It also specializes in preparing credit reports on businesses and providing real estate market data.
Although TRW officials would not comment Wednesday on reported negotiations with a pair of Boston investment firms, the 1,320 Orange County employees were told in a meeting late last month that a sale could be in the works.
One industry insider said that there has been a “flurry of calls to competitors” by TRW employees putting out feelers in case their jobs suddenly evaporate under new ownership.
During the recent employee meeting, however, workers were told that it was unlikely the company would be pulled out of Orange County.
TRW Information Systems and Services, the Cleveland-based conglomerate’s data unit, has 3,600 employees nationwide. A TRW spokeswoman wouldn’t comment on whether a sale would affect the millions of consumers whose credit data is collected by the unit.
Mergers and acquisitions specialists Bain Capital Inc. and Thomas H. Lee Co., reportedly the leaders of the investment group talking with TRW, declined comment Wednesday.
The possibility of a sale of the $600-million-a-year TRW information business, which posted an $86.8-million operating profit last year, was first raised in December by TRW Chairman Joseph T. Gorman.
The division accounts for only about 6% of TRW’s total sales and its profit was down 10% from 1994. Although TRW has pumped millions of dollars into the division in recent years, its share of the consumer credit market has dropped to about 30% from almost 35% in 1990, said analyst Robert V. Bolen of J.C. Bradford & Co., a Nashville, Tenn., investment banker.
Gorman said he would consider selling the information unit because it doesn’t fit with plans to concentrate on the company’s core aerospace and automotive businesses.
Since then, industry sources said Wednesday, TRW has been talking to a string of possible buyers. The group led by Bain and Lee is believed to be closest to a deal.
Bain Capital was founded in 1984 and has participated in more than 70 deals, including the December purchase of a clinical diagnostics business from DuPont Co. for $450 million.
Lee Co., which specializes in arranging management-led leveraged buyouts, made about $900 million for its investors in the 1994 acquisition of Snapple Beverage Corp. by Quaker Oats Co. Lee Co. and its investors had purchased Snapple for $135 million in 1992. The company, formed in 1975 by Boston financier Thomas Lee, has arranged or led more than 125 corporate buyouts.
Analysts agree with Gorman’s comments that the TRW information unit is a misfit and thus ripe for a sale.
The Information Systems & Services division is “a stepchild,” said Los Angeles investment banker Lloyd Greif. “And a stepchild doesn’t get the resources it needs from the corporation. For TRW it’s not their core business and it’s not where they want to be.”
For an outside investor, however, the unit can be attractive because it is profitable and generates a steady flow of cash. “You need that to pay back the debt that will be incurred in a transaction like this,” Greif said. “It’s a perfect candidate” for a leveraged buyout, financed by borrowing against the assets of the company.
In recent years, TRW has made significant investments in the information systems business.
In July, TRW invested $15 million and hired 50 people to open a consumer credit information joint venture in Mexico.
And it fulfilled a decade-long goal of expanding into Japan’s credit-information market with its 1992 purchase of a small stake in Central Communications Bureau Co., Japan’s fourth-largest credit bureau with files on more than 25 million Japanese customers.
Last June, it made an agreement with CCB to swap credit information. The venture provided TRW with an opportunity to expand in Japan’s unregulated credit-information market at a time when enforcement of U.S. privacy laws is heating up, analysts said.
The credit-reporting business in 1991 was accused of making errors in consumers’ credit reports and later settled lawsuits in 19 states.
The unit admitted no wrongdoing but has instituted a series of changes aimed at improving the accuracy of its credit reports and making it easier for consumers to discover and correct inaccuracies.
TRW’s stock dropped 62.5 cents a share Wednesday to close at $86.875 in trading on the New York Stock Exchange. The shares jumped $2.875 Tuesday in the wake of a report about the information unit’s potential sale.
Times staff writers Don Lee and Debora Vrana contributed to this report.
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Headed for the Block?
Cleveland-based TRW Inc. is considering selling its Information Systems & Services division, which is based in Orange County. A profile of the division:
* Headquarters: Orange
* Business units: Information Services (consumer credit data); Business Information Services, (business credit analysis); TRW REDI Property Data (real estate information unit in Anaheim)
* Employees: 3,600, including 1,320 in Orange County
* 1995 revenue: $604 million
* Executive vice president/general manager: D. Van Skilling
Source: TRW Inc., Times reports; Researched by JANICE L. JONES / Los Angeles Times
