International Harvester Co. yesterday agreed to sell its beleaguered construction-equipment business to Dresser Industries Inc. for an undisclosed amount.
Dresser is the Dallas-based supplier of oil field and construction equipment that has run afoul of the Reagan administration because its French subsidiary sold equipment for the proposed Soviet-Western European natural gas pipeline.
Industry analysts said the price paid for the division was probably no more than $200 million. Harvester has been trying hard to sell the division, which had sales of $743 million last year, as part of a sweeping reorganization of the debt-ridden Chicago-based tractor and truck maker. The construction division accounted for approximately 10 percent of Harvester's total sales last year. Hard times in the construction business and tough competition at home and abroad have severely constricted the division's sales in recent years.
Some analysts had questioned whether Harvester would find a buyer for the division, and were surprised that Dresser had made a bid. "It was a surprise to me. I didn't think it was going anywhere," said John McGinty, who follows Harvester for First Boston. "I'm surprised that anybody wanted it. . . . The price must be incredibly cheap."
"Obviously it's good from Harvester's point of view, and they need the cash, whatever the amount is," said another analyst, who asked not to be identified. "Dresser's got a lot of explaining to do because normally a good company like that doesn't buy a case of leprosy like this."
In an interview in Dallas, Edward R. Luter, Dresser's senior vice president for finance, would not disclose the purchase price, but he indicated it reflected Harvester's distressed condition. "As you can imagine, in that situation, the price was fair," he said. "The time to buy something is when it's down."
McGinty said the price was hard to guess because it is unclear how much of the division's outstanding receivables and unfunded pension liabilities Harvester had retained. He said Dresser "might have paid $200 million if Harvester kept all the unfunded pension liabilities."
Neither company was releasing many details on the planned sale but, under the terms that were disclosed, Dresser would get the division's factories in Libertyville, Ill., and Candiac, Quebec, a parts distribution center in Broadview, Ill., and "assets of other facilities" that were not specified. Slightly more than 1,000 employes are involved, most of them in Illinois.
Dresser, which already sells a variety of construction equipment under the Galion and Marion brand name, will continue to make IH products under the International, Payline and Hough names. Harvester's construction products include wheeled and crawler tractors and loaders and scrapers. Harvester said Dresser plans to keep Harvester's network of construction-equipment dealers, 60 percent of whom already carry Galion equipment, according to an IH spokesman.
McGinty said Dresser could make the IH division profitable if it severely cut the number of products being offered. He said, however, that the competition offered by industry giant Caterpillar Tractor Co., Japanese tractor maker Komatsu and Deere & Co. makes it difficult for other companies to compete in the construction equipment business.
Harvester confirmed widely held speculation late last month when it announced that it wanted to sell the construction equipment division, which dates back nearly to the turn of the century, when the company began modifying farm tractors for construction use. On Tuesday, Harvester said it had terminated talks on the possible sale of the division with IBH Holding, a West German firm that has specialized in picking up construction equipment companies at bargain-basement prices. Analysts suggested that IBH backed off because it had been outbid by Dresser.
One analyst, noting that the deal with Dresser did not include Harvester's small overseas construction operation, suggested another sale could be in the offing.