TELEDYNE REPORTS MERGER.

Byline: John Holusha The New York Times

Teledyne Inc., moving to thwart the hostile-takeover efforts of WHX Corp., said Monday that it had agreed to merge with the Allegheny Ludlum Corp., the nation's largest producer of stainless steel.

The two companies said the all-stock deal was valued at more than $3.2 billion, based on 176 million shares in the new Allegheny Teledyne Corp., and the $19 closing price of Allegheny Ludlum's stock Monday.

WHX had planned to conduct a proxy fight to take control of the Teledyne board, which rejected WHX's most recent takeover proposal of $1.78 billion in February. A similar fight last year gained a board seat for Ronald LaBow, the chairman of WHX, whose principal subsidiary is Wheeling-Pittsburgh Steel Co.

With the new agreement, the annual meeting, originally set for later this month, has been postponed and will be rescheduled.

If the merger is completed, the combined Allegheny Teledyne would have about $4 billion in sales and would be the largest specialty metal company in the world, Richard P. Simmons, the chairman of Allegheny Ludlum, said.

WHX and Allegheny Ludlum are both steelmakers, but Allegheny is in the premium end of the business, while WHX produces lower-priced, commodity-grade products, primarily carbon steels. Teledyne produces specialty alloys used in aircraft and other high-technology applications; it also makes industrial and consumer products, including the Water Pik shower head.

``The average price for the products I make is $3,000 a ton,'' Simmons said. ``The average price for ordinary carbon steels is $400 a ton.''

In addition, Allegheny Ludlum has been consistently profitable for the last decade and a half, while Wheeling-Pittsburgh spent years under protection of bankruptcy laws as the basic steel business slumped.

The combined Allegheny Teledyne would have 58.3 percent of its sales in specialty metals, 25 percent in aviation and electronics, with the industrial and consumer produces of Teledyne accounting for the rest.

Under the terms of the agreement, Allegheny Ludlum shareholders are to receive one share of the new company for each existing share while Teledyne shareholders are to get 1.925 share for each of theirs. Thus, Teledyne shareholders will control about two-thirds of the stock of the combined companies.

Based on Allegheny Ludlum's closing price Monday of $19 a share, the deal would value Teledyne's existing shares at more than $36.50. WHX's most recent offer for Teledyne was valued at $32 a share, consisting of cash and some stock.

The deal was announced Monday after the stock market closed. Teledyne's shares ended the day up $3.875, at $31.875, with all of the gain coming in after-hours trading. Allegheny Ludlum was unchanged at $19 in after-hours trading, after gaining 50 cents in regular New York Stock Exchange trading.

Executives of the companies said that the combination would generate savings of at least $85 million in pretax earnings and that the cash flow would enable Allegheny Teledyne to pay an annual cash dividend of 64 cents a share, an increase of 23 percent for Allegheny Ludlum shareholders.

A spokeswoman for WHX questioned the value for Teledyne shareholders of the combination with Allegheny Ludlum. She noted that the deal featured no cash, that it increased the number of shares outstanding and that it leaves Teledyne's management in place. ``We are continually amazed that the only time Teledyne's board does anything is when WHX commences a proxy fight,'' she said.

WHX, which has serious problems with pension funding and medical care for retired workers, was generally thought by analysts to be interested in Teledyne because of its heavily overfunded pension funds. Allegheny Ludlum was similarly attracted, its executive acknowledged.

``Our pension funds are somewhat underfunded by a couple of hundred million, depending on what calculation you use,'' Simmons said. ``The ability to make use of the overfunds will accrue to both sets of stockholders and will make Allegheny Ludlum a stronger competitor.''