Whittaker sells chemical business to pay off debt.

Whittaker sells chemical business to pay off debt

Management LBO last year prompts $225 million sale

West Los Angeles-based Whittaker Corp. last week agreed to sell one of its three major segments, apparently to pay down debt it took on last year in a management leveraged buyout.

The segment, specialty chemicals, along with a business coatings group, will be sold for $225 million to Morton International Inc., a Chicago-based manufacturer of specialty chemicals, and is subject to government approval.

"It sounds like a pretty good price to me," said analyst Robert Hanisee of Los Angeles-based Seidler Amdec Securities Inc. "I don't know what the [coatings group] net asset values were, but if they were half the size [of the chemicals business] that price is pretty damn good."

The two businesses being sold had combined revenues of about $180 million on Oct. 31, 1989 -- the chemicals segment with $43 million in assets, the coatings group with undisclosed assets.

The coatings group represented 37 percent of the revenues the businesses targeted for divestiture to service Whitaker's $198 million debt. A previous deal to sell the group fell through last October.

The specialty chemicals segment, which the company previously did not intend to sell, brought in $42 million for the year.

"My guess is that Morton was willing pay a better price for [the coatings group] as a package [with specialty chemicals]," said analyst Laurence Lytton of Drexel Burham Lambert in New York.

The sale, which includes Morton's assumption of certain undisclosed liabilities, permits Whittaker to focus "on further development of aerospace and biotechnology," said Chairman and CEO Joseph F. Alibrandi in a prepared statement.

Whittaker's biotechnology segment, with revenues of $31 million, makes it one of the largest biotechnology companies in L.A. County.

"The commercial aerospace business is looking quite promising," said analyst Lytton. "Biotechnology's also been a consistent good earner [for Whittaker]."

Last year, the company had slated for divestiture businesses that brought in more than half its revenues, or $324 million, and income of $8.4 million for the year ended Oct. 31, 1989. Continued operations, including the three major segments of specialty chemicals, biotechnology and aerospace, earned $32 million on sales of $210 million.

The company's plan to divest and recapitalize began with an unsolicited takeover bid in late 1988 by Caiola Associates.

Caiola, which held 4.9 percent of the stock, offered to acquire the company for $47.50 a share, despite a June 1988 U.S. Department of Justice investigation of Whittaker involving defense procurement.

Its stock closed up $0.875 following last week's announcement, at $8.50.

"Right now, [the price is] about where it ought to be," commented analyst Hanisee. "If they set their earnings goal, the price is low; if they don't, it's high."

At the end of this month, Whittaker will release its first quarter earnings.