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AT&T to Acquire Some Western Union Assets

July 04, 1990|From Reuters

NEW YORK — American Telephone & Telegraph Co. said Tuesday that it would buy some of the remaining assets of Western Union Corp., the troubled communications company with which it has been intertwined for more than a century.

AT&T, trying to build up its non-telephone businesses, said it would pay $180 million for Western Union's electronic mail and Telex businesses, which accounted for 40% of its revenue last year.

After completing the deal, cash-strapped Western Union will concentrate on building its financial service businesses, including money transfers, which are believed to have the most growth potential.

The sale marks another significant business deal between two companies that alternately have been archrivals and partners developing the U.S. communications business during the past century.

"AT&T has been bailing that company out of trouble for the last 75 years," said John Bain of Raymond James Associates.

At one time Western Union tried to develop its own telephone system, employing Thomas Edison to improve on Alexander Graham Bell's invention. But after being sued on grounds of patent infringement, Western Union got out of the business.

The two companies were joined in the early 1900s, when AT&T acquired a controlling block of Western Union's stock, but were broken up by a government edict that effectively removed the "telegraph" part of AT&T's business.

Although New York-based AT&T remains the country's most powerful telecommunications concern, Western Union, based in Upper Saddle River, N.J., has been struggling in recent years to stay afloat.

During the past few months, the company has frequently been reported to be on the brink of bankruptcy. It is battling a debt load that dates to a failed diversification program from the early 1980s.

The debt, which stands at $640 million, was compounded when the company was bought by Bennett LeBow, a New York investor who drew heavily on high-interest junk bonds to finance the transaction.

A Western Union spokesman said the company intends to use a major portion of the proceeds from the latest sale to recapitalize the company.

"A major objective is to divest the company's telecommunications businesses and rationalize the capital structure," the spokesman said. "The problem the company faces is that its fixed charges on debt are too high."

Western Union's Telex business has been particularly hard hit by the growing popularity of facsimile machines, which now can be found in most offices and many homes.

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