Black & Decker Corp. announced yesterday that it will sell one of its recently acquired divisions, but the move didn't seem to satisfy investors concerned about whether the company can raise enough cash to pay its looming debts.
The Towson-based hardware giant's stock fell $1 after the announcement yesterday, declining to $9.625 a share, less than half of its January trading price and down more than $3 from its mid-September level.
Black & Decker, which borrowed $3.8 billion to buy Emhart Corp. last year, has said it needs to sell off more divisions to meet its debt payments next year.
Yesterday, the company said it has agreed to sell Emhart's Gardenamerica Corp., which manufactures irrigation systems and watering devices for lawns, for $40 million to James Hardie Industries Ltd. of Australia.
Gardenamerica, with headquarters in Carson City, Nev., has about 1,000 employees and annual sales of about $60 million, said Stephen Page, the chief financial officer at Black & Decker.
Gardenamerica was earning an operating profit, Mr. Page said, confirming that estimates by analysts of $3 million in annual operating profits for the division were "close."
Stock analysts who follow the hardware industry said the sale of Gardenamerica was heartening but that it did not raise enough cash to ensure that Black & Decker can repay its debts.
Cliff Ransom, an analyst at Ferris, Baker Watts in Baltimore, said Black & Decker is "well on its way" to meetings its debt requirements but that the company needs to sell more divisions soon.
"They will need to sell another $130 to $150 million worth of assets by the beginning of 1991," he said.
In an interview before the sale announcement, David Leibowitz, an industry analyst for American Securities in New York, said Black & Decker's stock is tumbling because investors think the company has been caught in the economy's "buzz saw."
The company took on a huge amount of debt just as consumers and corporations slowed down on purchases, he said.
"Consumer goods are getting hammered. The housing picture can be most kindly compared to a disaster zone. And new housing starts and housing resales are equally devastating," Mr. Leibowitz said.
While retail sales were flagging, the spree of corporate takeovers died, leaving Black & Decker unable to sell divisions it had put on the block.
"The subsidiaries of Emhart they had hoped to be able to sell are no longer fetching the prices they originally estimated," Mr. Leibowitz said.
As a result, Black & Decker is cash-strapped.
"People are concerned that the company may not be able to pay down debt as expeditiously as originally hoped," Mr. Leibowitz said.
Mr. Page, the top financial officer at Black & Decker, sought to ease concerns about the company's debt load yesterday, saying the company will announce the sale of another division before the year is over.
The company already has announced that it would like to sell its Planning Resource Corp. division and has offered and withdrawn divisions such as Dynapert.
Mr. Page said about $1.5 billion worth of divisions are up for sale, though he would not identify all of them.
Black & Decker needs to sell $500 million more to raise the cash it needs to pay off its debts, Mr. Page said.
Mr. Page said the assets Black & Decker has sold so far this year demonstrate that the company is receiving good prices, though closing the deals is taking longer than he anticipated.
Early this year, Black & Decker sold its Bostik adhesives division for $345 million, its footwear materials division for $125 million and the European operations of its Arcotronics capacitor business for $80 million.
In a discussion with Shearson Lehman Brothers Inc. this summer, Black & Decker President Nolan D. Archibald said those prices were "spectacular," since the three divisions had annual earnings of only $27 million.