Group to Buy TRW Division Based in Orange

TRW Inc.’s credit reporting and real estate information division, a major Orange County employer that collects and distributes financial data on millions of Americans, is being sold for $1.1 billion to a private investment group.

The deal, announced Friday by the division’s Cleveland-based parent, apparently followed a campaign by frustrated executives to win their freedom from TRW, which they felt was ignoring the information division’s potential.

TRW Information Systems & Services’ market share has shrunk to about 30% from 33% in 1990, according to industry analysts. It remains one of the nation’s largest consumer-credit rating agencies, however.

The new, privately held company that emerges from the transaction is expected to remain in Orange under its present management. General manager D. Van Skilling will become chief executive when the sale is completed.

“I’ve been telling them for several years to play me or trade me,” said Skilling, 62, a 26-year veteran at TRW.

Employees in Orange, who were told of the deal at a meeting at the nearby Doubletree Hotel Orange County shortly before noon Friday, said they were happy that the company was not being acquired by a competitor that would likely have slashed the payroll and consolidated TRW’s operations although they still had some concerns.

“There was some out-and-out joy and some apprehension,” said Ken Krueger, a 10-year company veteran. “Joy because we know that this group wants to buy us and apprehension because there’s still uncertainty about what each person’s job future holds.”

But if another company had acquired the unit “they obviously wouldn’t need the same level of staffing,” Krueger said. “This is the best news we could have gotten.”

TRW Information’s 3,600 employees will be retained and the basic business operation will not be changed, Skilling said. The company has a license to its old name for as long as two years and will operate as TRW Information while professional corporate identity designers wrestle to come up with a new one.

Consumers’ credit reports won’t be affected by the sale, said Mark Nunnelly, managing director of Bain Capital Inc., one of two Boston-based investment firms financing the deal.

TRW Information maintains and issues credit reports on more than 190 million people and 13 million businesses. Subsidiaries provide direct marketing information to retailers and collect and interpret real estate market data for clients in the real estate and property development industries.

The sale is expected to be completed in the third quarter.

Bain Capital, which specializes in mergers and acquisitions in the information services industry, teamed with Thomas H. Lee Co. to head the consortium that is buying TRW Information.

Neither Nunnelly nor Lee executive Scott Sperling would identify other members of the financial group.

They hinted, however, that there will be quick moves to expand TRW Information into overseas markets and to bolster its targeted marketing operations.

“It is fair to say that our focus will be to grow the business . . . and companies are hungry for targeted marketing information, which positions us for growth in domestic markets and abroad,” Nunnelly said.

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Like many employees, Krueger said he’s sensed that TRW has, for years, been treating the credit business like a stepchild. “For as long as I’ve been working here, I’ve watched TRW spend most of its money on other businesses,” Krueger said.

He said he too believes there is a burgeoning market for U.S.-style credit reporting skills in foreign markets.

“Most countries in the world don’t utilize credit reporting as heavily as we do,” Krueger said. “So we haven’t scratched the surface internationally. And I think this group is looking with interest to the overseas business.”

Asked about the overseas expansion, Skilling said the possibility “is one of the reasons I’m very excited about this opportunity.”

As Skilling noted during the morning meeting, the pending sale generates uncertainties for employees, including questions about how TRW pension plans will be handled and what changes will occur as the unit readies itself for life as an independent company.

Lisa Lachapelle, a four-year TRW employee, echoed sentiments voiced by most workers in Southern California who have watched banks, defense contractors and department stores disappear: “I don’t think that any jobs are safe these days. It doesn’t matter if you’re working at a sole proprietorship or a big corporation. There are no guarantees anymore.”

But Gail Spencer, a market research manager and a nine-year TRW Information Systems & Services veteran, said the deal represents “good news . . . because now we can go ahead and do what we do best.”

TRW Information has 1,000 people at its headquarters in Orange and 320 at the TRW-Redi Property Data Services subsidiary in Anaheim.

Atlanta-based Equifax Inc., TRW’s major competitor in the credit reporting business, declined comment. Equifax had considered making a bid for the information systems unit when TRW put it on the market late last year, but reportedly decided against the move.

Officials at Chicago-based Trans Union Inc., the other major player in the market, could not be reached for comment.

Joseph T. Gorman, chairman and chief executive of parent TRW, said his company will receive $1.01 billion in cash and $90 million worth of stock for the information services unit, which last year posted sales of about $540 million--just over 5% of TRW’s total revenue.

TRW will have a 16% stake in the new company and will keep a seat on its board of directors.

Gorman said TRW plans to use cash from the sale to buy back company stock and finance investment opportunities in the company’s automotive and space and defense businesses.

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Although many analysts greeted the news favorably, many investors have been worried that selling the information unit would cut into TRW’s profitability. TRW stock dropped $1.25 a share to $85.125 on the New York Stock Exchange before trading was suspended Friday afternoon in anticipation of the company’s announcement.

The TRW Information operations have been called an orphan subsidiary by some analysts because their business does not mesh with parent TRW’s core pursuits in the automotive and aerospace industries.

“It makes sense to sell it, because it doesn’t fit,” said Cai Von Rumohr, an analyst with investment banker Cowen & Co. in Boston.

But it also is a money maker, generating nearly $90 million in operating profit last year.

“The financial returns for TRW have not been as high as the company would like, but it remains a very good, solid business,” said analyst James E. Pierce of Philadelphia’s PNC Institutional Investment Services.

Boston investors Bain and Thomas H. Lee Co. are known as buyers that pump up and strengthen their acquisitions rather than breaking them up and selling off the parts.

“These are not trash-and-burn investors,” said Los Angeles investment banker Lloyd Greif, who has been involved in several deals with Bain and Lee.

“I think we will see a lot more attention paid to the property than has been paid to it in the past,” he said. “Management will be able to fly free for a change, and to fly higher than allowed to under TRW.”

Times staff writer Greg Johnson contributed to this report.