International Business Machines said Wednesday that it will form a new subsidiary for its worldwide typewriter, keyboard and personal computer printer operations and hopes to sell a majority stake in the business to Clayton & Dubilier Inc., a New York buyout specialist.
Financial details of the sale, expected to be final by year-end, were not released. But analysts estimated that IBM, which plans to keep a 15% to 20% share of the new venture, would get between $2 billion and $3 billion for the rest. IBM said Clayton & Dubilier is expected to split a portion of its stake with current managers and employees of the business.
The new company and its spinoff are more evidence of IBM's recent efforts to concentrate on its core computer and software businesses and reduce its overall size and operating expenses.
As part of the deal, IBM will offer enhanced severance pay to try to persuade up to 1,200 employees of the new unit in Lexington, Ky., to quit or retire early. The inducements include up to two years pay plus $25,000 per person.
"The new company will enable us to reduce overhead and more efficiently allocate our resources to strengthen both the subsidiary and IBM as a whole," IBM Chairman John F. Akers said.
On Wall Street, where rumors of the pending deal have been circulating for weeks, IBM stock gained 12.5 cents to close at $111.625 in moderate trading on the New York Stock Exchange.
The new company will eventually include all of IBM's information products operations worldwide, include manufacturing plants in Lexington and in Boulder, Colo., and smaller offices in Europe and Asia. The new company will have annual sales in excess of $2 billion and 3,500 to 4,000 employees.
Marvin L. Mann, now an IBM vice president, will become chief executive of the new firm, which will continue making typewriters and some computer printers under the IBM name. An IBM spokesman said IBM expects to be the single largest customer of the new venture as a result of its purchase of personal computer keyboards, printers and other products.
Founded in 1978, Clayton & Dubilier has acquired 15 companies, including several low technology businesses, with combined sales of $7.5 billion. The buyout firm usually avoids unfriendly maneuvers.
CLAYTON & DUBILIER'S STRING OF BUYOUTS Between 1978 and 1989, Clayton & Dubilier acquired 15 businesses with combined sales of more than $7.5 billion, including the following companies: APS Inc. (Houston) Automotive parts distributor, serving a national network of 1,400 independently owned jobbers and 110 company-owned stores through its 29 distribution centers. Acquired from Wickes Cos. in 1989 for about $200 million. Kendall Co. (Boston) Disposable medical products. Acquired from Colgate-Palmolive in 1988 for $960 million. Uniroyal Goodrich Tire Co. (Akron, Ohio) Acquired as part of the $950-million restructuring of the company that was formed in 1986 by merging the automobile and light truck tire subsidiaries of B.F. Goodrich and Uniroyal Inc. Homeland Stores Inc. (Oklahoma City) Supermarkets in Oklahoma, Texas and Kansas; food processing plants. Acquired from Safeway in 1987 for about $165 million. BW/IP International Inc. (Long Beach) Advanced technology fluid transfer and control equipment and systems. Acquired from Borg-Warner Corp. in 1987 for $200 million. O.M. Scott & Sons Co. and Hyponex Corp. (Marysville, Ohio) Lawn care and garden products. Scott was acquired in 1986 for about $200 million. Scott later acquired Hyponex.