ITT Corp., faced with the threat of a possible takeover, announced yesterday that it plans to sell major parts of its Eason Oil Co. subsidiary to Sonat Inc. and Standard Oil Co. of Ohio for $240 million.
The announcement comes amid speculation that several investors may be considering a takeover of the telecommmunications and insurance conglomerate, with the intention of breaking it up and selling all or parts of it piecemeal.
The sale, to be completed later this month, is part of a major divestiture program by the company. In the past few years, ITT has been shedding its subsidiaries almost as fast as it purchased them during the late 1960s and 1970s.
Just last August, the company sold its Continental Baking Co. for $475 million. ITT plans to sell more of its assets, particularly as the company considers the advice of two investment houses it recently hired for divestiture recommendations.
"These divestitures are part of our continuing, extensive program of asset deployment," ITT's chairman, president and chief executive, Rand V. Araskog, said yesterday.
Eason's sale was immediately applauded on Wall Street, where financial analysts called it a step in the right direction.
"This will enable ITT to use the proceeds to pay off long-term debt and invest in the longer-term-growth areas of telecommunications and financial services," said Robert Sullivan of Paine Webber Mitchell Hutchins.
Perhaps even more significant, this divestiture is a signal to those interested in taking over the company that ITT is serious about selling its assets, a fact that might help the company in any takeover battle.
"This reduces the benefit of what a competing group would offer," said Larry Baker of The E. F. Hutton Group Inc.
However, the analysts noted that ITT will have to continue divestitures -- and larger ones -- to overcome its financial troubles and ward off any takeover threat. "Two hundred and forty million dollars is a lot of money, but ITT is an awfully big company," Sullivan noted.
This past year, the company announced that it would cut its annual dividend for the first time in nearly two decades. The cut, from $2.76 to $1 a share, surprised Wall Street and sent ITT's stock spinning downward, a move that sparked the takeover rumors. Earnings for the year are expected to be $435 million -- down sharply from last year's level of $675 million.
ITT will sell about 80 percent of Eason, retaining its drilling equipment division. The exploration and production division will be sold to Sonat Exploration Co., a subsidiary of Sonat Inc. Eason's gas processing division will be bought by Sohio Petroleum Co., a subsidiary of Standard Oil Co. of Ohio.