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Westinghouse Is Considering Split to Invigorate Its Stock Performance


Continuing the sweeping transformation that gained momentum with the purchase of CBS Inc., Westinghouse Electric Corp. said it was considering splitting itself into two parts, separating the broadcasting group from the company's core industrial businesses, which include power generation, nuclear systems and mobile refrigeration units.

Michael Jordan, the chairman and chief executive of Westinghouse, told Wall Street analysts on Monday that he had made the recommendation at the company's board meeting on May 29 and that a decision on how to achieve such a split would be made within the next six months.

"Jordan has been talking about this for six months, but today he committed to do something about it in the next 120 to 180 days," said Nicholas Heymann, an analyst at NatWest Securities. "Management is committed to improving the stock price and to completing one of the largest corporate transformations in history. It will ultimately be achieved through a sale, a spinoff or a joint venture of much that is in the industrial group today."

Since agreeing to acquire CBS last summer, Westinghouse has sold off about $4 billion worth of assets in an effort to refocus the company, which now has $5 billion worth of assets each in broadcasting and industrial businesses. But despite aggressive efforts to invest in programming to revive the CBS network and to pay down debt, Westinghouse's stock has remained relatively stagnant, hovering between $18 and $20 a share since the merger was completed early this year.

It closed Monday at $19.625, up 87.5 cents on the NYSE.

Westinghouse said it would consider several options, including the creation of a so-called tracking stock, a separate stock whose value is based on a particular set of assets. However, Wall Street was not enthralled when Jordan recently floated the idea of a tracking stock.

One factor motivating Westinghouse's move, according to analysts, is to make the stock a more attractive currency for making acquisitions, particularly in the fast-consolidating radio business, which Jordan has called CBS' "crown jewel." The stocks of entertainment companies generally trade at a higher multiple than industrial companies.

Sources said CBS is interested in doubling the size of its radio group by buying Evergreen Media Corp. in a deal valued at about $1.2 billion. While Evergreen's founders insist on a tax-free stock transaction, Westinghouse would rather not use undervalued shares for the purchase.

Evergreen has 24 FM and 11 AM stations and would give CBS attractive duopolies in several large markets, including New York, Chicago and Los Angeles. Yet Westinghouse could lose out if it waits too long. Radio groups like Infinity Broadcasting Corp. are on the prowl for acquisitions. ABC Radio has told its employees that it would like to double in size.

Jordan has also vowed to expand CBS' cable holdings and has been rumored to be interested in buying Gaylord Entertainment. Westinghouse's Group W broadcasting unit already owns a third of Gaylord's Country Music Television and distributes its sister, the Nashville Network.

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