Requiem for a Conglomerate : Once-Soaring Teledyne to Slip From Scene
After 3 1/2 decades that included stellar growth, costly scandals, deteriorating profits and then signs of a comeback, Teledyne Inc. is about to slip quietly into the history books.
Stockholders today are voting on Teledyne’s merger with stainless steel maker Allegheny Ludlum Corp. in a stock deal valued at $2.2 billion, and approval is expected.
The deal should close quickly thereafter, with Pittsburgh-based Allegheny Ludlum renaming itself Allegheny Teledyne Inc. Teledyne’s headquarters in Century City will cease to exist.
Teledyne is the latest in a string of legendary U.S. conglomerates that have disappeared in recent years, either by breaking themselves apart or by being acquired.
The conglomerates--built with hordes of disparate, far-flung businesses--flourished in the 1960s and ‘70s and richly rewarded their stockholders.
But their attraction had ebbed by the 1990s. Wall Street sneered that their hodgepodge of operations had become too unwieldy at a time when businesses were trying to be more efficient, focused and nimble in the face of increasing global competition.
Teledyne fulfilled those expectations, posting lackluster results in recent years. In addition, the company found itself entangled in a slew of criminal probes and civil lawsuits that left the company tarnished with scandal.
So Teledyne agreed to merge with Allegheny Ludlum in April, and now is joining the likes of ITT Corp., Litton Industries Inc. and other conglomerates that have been dismembered or sold.
“It was Teledyne’s turn,” said Guy Wyser-Pratte, a New York money manager who pushed for Teledyne’s sale, and now plans to vote his firm’s 1.3 million Teledyne shares in favor of the merger.
“The marketplace no longer appreciates the structure created by the conglomerators” in the 1960s, he said.
With 18,000 employees, Teledyne is perhaps best known to the public for its Water Pik shower heads and dental hygiene products. But the company also makes a myriad of items in the aerospace, industrial, specialty metal and electronics industries.
Teledyne builds components for pacemakers, aerial drones for the Pentagon, portable forklifts, thread-cutting equipment and piston aircraft engines, to name just a few products.
Analysts speculate Allegheny Ludlum will divest certain of Teledyne’s operations--including, perhaps, its consumer products--after the merger, although the company has not yet stated its plans. As a result, it’s not yet known what impact the merger might have on Teledyne’s work force, which includes about 3,600 employees in California.
Teledyne was the creation of Henry E. Singleton, a secretive, enigmatic son of a Texas rancher. A graduate of the Massachusetts Institute of Technology, Singleton left an executive’s post at Litton to co-found Teledyne in 1960.
Singleton--like ITT’s Harold Geneen and Litton’s Charles “Tex” Thornton--built their conglomerates with skillful acquisitions. Singleton excelled at using Teledyne’s richly valued stock to buy small manufacturing or technology firms that had solid niches in their fields. And as Teledyne grew, Wall Street bid its stock even higher, allowing for still more deals.
The idea was that the unrelated divisions would counterbalance each other’s up-and-down business cycles. In 1984, Teledyne earned $574 million on sales of $4.8 billion, and by the late-1980s the company was still earning an impressive 9 cents per dollar of sales.
Singleton also allowed his subsidiaries to largely operate on their own. Only 200 or so people worked at Teledyne’s headquarters, and Teledyne often was referred to as a “federation” of companies united under one roof.
And despite Teledyne’s publicly held status, Singleton and his lieutenants rarely talked to the media. This week was no exception: A telephone receptionist at Singleton’s Beverly Hills office said he would not be interviewed, and hung up.
Singleton’s concept worked nicely for three decades. But just as he retired from daily management in 1989, Teledyne began to unravel.
The company’s financial results began to tank--in part because of defense-spending cuts--and since then it has never come close to matching its performance of the 1980s.
Moreover, various Teledyne units became the targets of more than a dozen criminal investigations and civil lawsuits, many of them accusing Teledyne of fraud in connection with government contracts.
Last year, for instance, Teledyne pleaded guilty to charges that it illegally exported zirconium that was used in making cluster bombs for Iraq.
Most of the cases are now behind Teledyne, but they have cost the company more than $250 million in fines, penalties, settlements and legal expenses.
Ironically, Teledyne watchers tie many of those legal lapses to the autonomy that Singleton and other Teledyne executives granted their managers--the autonomy that once worked so well.
Singleton, whose net worth is estimated by Forbes magazine at $660 million, still owns 13% of Teledyne and the company said he plans to vote his shares in favor of the Allegheny Ludlum merger.
The merger pact, announced in April, calls for Teledyne stockholders to get 1.925 shares of the new company’s stock for each of their existing shares. The deal followed Teledyne’s efforts to fight off hostile takeover bids from another steelmaker, WHX Corp.
Teledyne was able to block WHX’s overtures in good part because Teledyne, under the guidance of current Chairman William Rutledge and President Donald Rice, was beginning to get healthier.
They slashed Teledyne’s divisions to 21 from 65, laid off more than 1,200 employees and shifted some of the company’s defense-heavy units toward more promising commercial ventures.
Those moves and other steps helped Teledyne report improved operating earnings in 1995 and resume its stock dividend.
After the merger, Rutledge will become Allegheny Teledyne’s president and chief executive. Rice already has announced plans to leave to pursue other interests.
And Singleton? Now 79, he lives on a sprawling ranch in New Mexico, maintaining his privacy. The proxy for today’s stockholder vote--the last proxy Teledyne is likely to issue--once again lists Singleton first as a rancher, and then as an investor.
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The Tale of Teledyne Teledyne Inc. which is merging wiht steelmaker Allegheny Ludlum Corp., has had a colorful history. Some highlights:
* 1960: Former Litton Industries executive Henry E. Singleton heads group that forms Teledyne.
* 1980: After acquistion spree, Teledyne becomes archetypal conglomerate, with a diversity of products that include Water Pik toothbrushes, airplane engines and forklifts.
* 1984: Teledyne’s performance peaks with profit of $574 million on sales of $4.8 billion.
* 1989: Singleton, a secretive, hands-off executive, retires from daily management. Teledyne becomes the focus of criminal probes and civil suits, many alleging fraud in government contracts.
* 1991: Singleton retires as chairman.
* 1993: Company massively restructures, slashing divisions to 21 from 65 and laying off 1,200 workers (It now employs 18,000.)
* 1994: Steelmaker WHX Corp. bids to buy Teledyne for $1.2 billion; Teledyne says no.
* 1996: Cost to Teledyne to resolve most of its legal problems reaches $250 million.
* 1996: Teledyne rejects revised takeover bid from WHX, agrees to merge with Allegheny Ludlum in a $2.2- billion stock deal.