American icon Western Union Corp., again facing up to big financial troubles, is set to embark on a second major reorganization with the sale to American Telephone & Telegraph Co. of most of its Business Services unit for $180 million.
The bulk of the sale's proceeds will go to pay off debt. The company now has about $1 billion in debt and has been losing money since the early 1980s. In the first quarter of this year, it lost $29 million on sales of $145 million.
AT&T is acquiring selected parts of Western's Union's Business Services Group, which oversees international and domestic telex, electronic mail (the sending of messages between computer screens), and a type of data transmission known as packet switching.
The agreement also provides for the transfer of 1,160 of the group's employees and many of its customers to AT&T.
Robert J. Amman, president of Western Union, stated that the sale will "facilitate the required recapitalization of the company" and will transform Western Union from a telecommunications company to a provider of financial services (primarily funds transfer) and mailgrams.
Its first major restructuring occured in 1988, when it laid off some 1,800 workers. Without that move the firm would have had to file for bankruptcy protection from creditors, many analysts said.
Last year, Western Union sold the Washington-Moscow hot line, the link set up more than 25 years ago to prevent war, to the Swiss-owned Tele-Columbus USA of New York for $56 million as part of the reorganization.
Argus Research analyst Geoffrey Johnson described Western Union now as "hanging on by their fingernails."
He said the sale will not raise enough cash to restructure the company's finances adequately. He added the firm has almost nothing left, having sold its networks overseas and other assets.
John Bain, of Raymond James research group, was more optimistic that the deal announced yesterday could revive the company.
He said the "operations of the company are okay, but if you look below the operating line," then the company is in less promising shape.
John Smart, AT&T president for Business Communications Services, called the acquisition a "strategic move that strengthens our position as a worldwide leader in electronic messaging services."
AT&T has been expanding its holdings overseas and recently bought the British data communications company Istel.
Western Union was created in 1851 and helped pioneer the U.S. telegram industry. When the telephone came along, it declined to invest in the new technology, saying it would never succeed.
But it was the telephone, proliferating into virtually every home and office of the nation, that began the end for Western Union. The American institution gradually was overtaken by phones, computers and other equipment that relay messages in seconds. Telex, one of its main businesses, has been undermined by facsimile machines.