Allegheny Teledyne Announces Major Transformation
Pittsburgh, PA, January 19, 1999 - Following studies and strategic analyses initiated last summer, Allegheny Teledyne Incorporated (NYSE:ALT) announced today it intends to pursue a course of action that would result in a significant transformation and reconfiguration of the company during 1999. Assuming legal, tax, financial and other considerations can be resolved successfully, the anticipated transformation would include a tax-free spin-off of a new public company and a public offering of the new company’s stock. The new company would be comprised of four former Teledyne companies in the Aerospace and Electronics Segment. The four businesses are Electronic Technologies headquartered in Los Angeles, CA; Brown Engineering headquartered in Huntsville, AL; Continental Motors headquartered in Mobile, AL; and Cast Parts located in southern California.
R. P. Simmons, chairman, president and chief executive officer, stated, “The new company can focus on its high technology competencies and markets in software and engineering systems, communication and electronics, and aircraft engines and components. These businesses are less capital intensive than our specialty metals companies and exhibit excellent returns and opportunities for growth through their own internal development as well as through acquisitions.” Combined 1998 revenues of the businesses in the new company were approximately $800 million. Plans are for Dr. Robert Mehrabian, executive vice president responsible for the Aerospace and Electronics and Industrial Segments and a director of Allegheny Teledyne, to be the chief executive officer of the new company headquartered in Los Angeles.
“We also are proceeding simultaneously with the previously announced consideration of a spin-off and public offering of the Consumer Segment into a freestanding public company which also will be headquartered in the Los Angeles area,” said Mr. Simmons. Annual revenues for the Consumer Segment were approximately $250 million in 1998.
“Preliminary legal and financial work is underway, and it is the current plan to submit a request for a private letter ruling to the Internal Revenue Service with respect to the tax-free nature of these proposed spin-offs by the end of the first quarter. Goldman, Sachs & Co. has been engaged to advise in this matter.”
Mr. Simmons added, “With independent boards of directors and separate access to the capital markets, we believe that Allegheny Teledyne and the two new public companies will be better positioned to focus on their own strategic objectives in their respective areas of expertise.”
After the spin-offs, Allegheny Teledyne, headquartered in Pittsburgh, will be focused as one of the largest and most diversified specialty metals companies in the world with annual revenues of approximately $2.5 billion in 1998. It would consist of Allegheny Ludlum/Rodney – a major specialty metals, stainless steel and titanium flat-rolled producer; Allvac – a major long products producer of nickel-based superalloys and titanium alloys; Oremet-Wah Chang – a diversified producer of zirconium, titanium and other specialty metals including niobium, tantalum and hafnium; Metalworking Products - a major producer of tungsten mill products, tungsten carbide materials and tungsten carbide cutting tools; Casting Service - a foundry specializing in large grey and ductile iron castings; and Portland Forge - a custom impression die forging company. Simmons said, “This strong base of specialty metals companies provides an excellent foundation for enhanced operating synergies and for adding strategically complementary acquisitions.”
Allegheny Teledyne also announced that it will explore selling Ryan Aeronautical, a producer of unmanned aerial vehicles (UAV) and target drones, located in San Diego, CA. It has engaged Bear, Stearns & Co. Inc. to conduct valuation studies and determine levels of interest in Ryan Aeronautical.
The company also announced its intention to sell its Fluid Systems business, a manufacturer of nitrogen gas springs, pressure relief valves and vehicle control valves headquartered in Brecksville, Ohio, and its Specialty Equipment business which consists of two divisions – one division, located in Canada, is an assembler of hydraulic attachments for mining and construction equipment and the other is a manufacturer of transportable forklifts in the U.S. and the Netherlands. Combined revenues of the three businesses to be sold were nearly $400 million in 1998.
Commenting further, Mr. Simmons said, “These proposed initiatives for spin-offs and divestitures reflect the culmination of the previously announced strategic study of the Allegheny Teledyne operating companies. We decided to pursue the plans we have outlined today after significant internal study, using the criteria of critical mass, strategic fit and opportunities for profitable growth, in consultation with investment bankers and supported by the board of directors. We have determined that when the transformation is complete, we will have significantly enhanced the opportunities to maximize stockholder value.
“If these initiatives can all be accomplished, our stockholders would own common stock in three distinct companies, each with a clear business focus and the financial ability to pursue its own individual strategic growth objectives. These transactions would also provide management in the new companies with stock-based compensation incentives directly tied to their own success.”
Simmons further announced that he has asked the board to begin a search to identify his successor as chief executive officer. In discussing this search, he stated that with the completion of the strategic review, he will have accomplished the principal goals he established at the time he reassumed the CEO role in February 1997. Continuing, he said, “I feel very good about the company and the progress it has made in every area during the past two years. The outlook for the future of all three companies is strong.”
Simmons indicated that the board has asked him to remain chairman of the board and chairman of the executive committee of Allegheny Teledyne, the positions he held prior to reassuming the additional positions of president and chief executive officer in early 1997. Names for the new companies have not yet been selected.
This news release contains forward-looking statements, including those related to the anticipated reconfiguration and dispositions. Consummation of the transactions and realization of the anticipated results could take longer than expected and implementation difficulties and market factors could alter the anticipated results. Actual results could differ materially from those projected in the forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those projected in the forward-looking statements is contained in the Company’s filings with the Securities and Exchange Commission, including its Report on Form 10-K for the year ended December 31, 1997 and its Report on Form 10-Q for the quarter ended September 30, 1998.
Allegheny Teledyne Incorporated is a diversified manufacturing company serving global markets with specialty metals, aerospace, electronic, industrial, and consumer products. The company is one of the largest and most diversified specialty metals producers in the world. With talented people using innovative technologies and systems, Allegheny Teledyne’s goal is to be the low cost, high quality supplier to global markets.