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Honeywell Pays Unisys $1 Billion for Sperry Unit

November 15, 1986|MICHAEL A. HILTZIK | Times Staff Writer

NEW YORK — In its second major divestment since becoming the nation's second-largest computer company, Unisys Corp. announced Friday that it has sold the former Sperry Aerospace Group to Honeywell for $1.025 billion.

Sperry Aerospace had been up for sale since the September merger of Burroughs and Sperry that created Unisys. Industry watchers regarded the sale price as unexpectedly high: Honeywell had originally placed a $700-million bid for the business, and other estimates of its price were closer to $800 million. Industry sources said that among other companies expressing interest in the unit were United Technologies and Rockwell International.

Sperry Aerospace had revenue of about $700 million in the fiscal year ended in March, the companies said. Based in Phoenix, the unit employs about 9,000 workers there and in Glendale, Ariz., Albuquerque, N.M., and Reston, Va. Honeywell's aerospace and defense unit, based in Minneapolis and employing 21,000 workers, had 1985 revenue of $1.9 billion--29% of Honeywell's $6.6 billion in total revenue.

Honeywell's purchase of the Sperry unit illustrates the diametrically opposed business strategies of the two companies. While Unisys is focusing on the data-processing business, which was the core business of Burroughs and Sperry, Honeywell is trying to shed its computer business to concentrate on its strong aerospace and defense lines. Honeywell has been discussing a merger of its computer business with NEC or French-based Groupe Bull, a move that would represent a partial divestment of the business.

"This is one of the few deals you could say is good for both sides," said George Elling, computer industry analyst for Oppenheimer & Co. "Honeywell has not done well in computers. They're trying to ease out of the mainstream, and they feel they have niche leadership in aerospace. Unisys is trying to emphasize its computer business. Both could be right."

Success Surprises Analysts

Burroughs had sought to merge with Sperry to create a credible second-place competitor to IBM in the computer market. Although the outcome of the battle is far from clear, industry observers say the merged company has proven more successful than expected in retaining orders for its two incompatible lines of computers.

In a statement issued with the announcement of the sale Friday, Honeywell Chairman and Chief Executive Edson W. Spencer said, "Combining Honeywell's very successful guidance and navigation systems for commercial and military aircraft with Sperry's highly regarded line of flight management systems and instrumentation will make Honeywell a major supplier for the cockpit of the future."

The Sperry sale puts Unisys ahead of schedule by as much as six months in its drive to pare $1.5 billion from the debt load of $3.4 billion amassed in the $5-billion Burroughs acquisition of Sperry.

Unisys Chairman W. Michael Blumenthal, who pursued the acquisition as Burroughs' chairman, had said the company would strive to complete the reduction by mid-1987. Friday's deal, combined with the $550-million sale of Burroughs' Memorex magnetic tape unit last month, means the goal could be reached by the end of this year. Still up for sale are Sperry's marine business and other assets.

Honeywell executives said Friday that the acquisition--which, as the transfer of a defense contractor, requires U.S. government approval--will be largely financed with short-term borrowings and consequently will dilute earnings by an undisclosed amount.

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