Teledyne Inc. announced late Monday that it is considering a plan to spin off its insurance and finance subsidiaries, a move that would slash the size of the diversified Los Angeles company by more than a fifth.
The company did not indicate why it was looking into divesting the operations. But an analyst who follows Teledyne, Robert M. Hanisee of Seidler Amdec Securities, said he viewed the announcement as a decision by company Chairman Henry E. Singleton to protect his personal wealth by placing his stock holdings in the care of more than one company.
Hanisee said the company's 72-year-old founder--who owns 13%, or roughly $500 million, of Teledyne's stock--has been reluctant to choose a younger executive to succeed him. Teledyne's president and chief executive, George A. Roberts, also is in his early 70s.
"He has a very small group of business associates with whom he shares his feelings with and trusts," Hanisee said of Singleton. "You have an obvious problem of aging senior management with no successor in sight.
"If you have a half-billion dollars of assets in a company, would you ride off and leave it to a yahoo?" Hanisee said.
The four units that Teledyne would sell to shareholders are United Insurance Co. of America, Trinity Universal Insurance Co., Financial Indemnity Co. and Fireside Thrift Co. Together they accounted for $988.1 million in sales last year, 21.5% of the company's $4.6 billion in revenue. The companies, which offer primarily casualty, life, accident and health insurance, contributed 18.5% of Teledyne's pretax income.
In a prepared statement, Teledyne said it expected its board to decide on the spinoff "within the next few months" and anticipated that the transaction would be completed in the fourth quarter if it receives regulatory approval.
Teledyne said the new company would be managed by Jerrold V. Jerome, 59. Currently a vice president at Teledyne and group executive of the Casualty Insurance Group, the 27-year company veteran has served as group executive of the firm's life insurance group.
Teledyne also announced the promotion of senior vice president William P. Rutledge, 47, to executive vice president for manufacturing. It also promoted senior vice president Hudson B. Drake, 54, to president of the Teledyne aerospace and electronics group; he will continue to be responsible for the firm's international marketing.
Hanisee, the Seidler Amdec analyst, said it did not appear that the executives' responsibilities would change substantially.
Meanwhile, Teledyne said second-quarter earnings would be down from recent quarters. It cited underwriting losses in its insurance and finance companies that stemmed from severe storms in the Southwest last month and weaker results in its aerospace and electronics group.