Black & Decker Corp. yesterday said it would sell its defense-related PRC Inc. to Litton Industries Inc. by next month and use the $425 million it will get to reduce a debt load that has been a nagging problem since its 1989 acquisition of Emhart Corp.
PRC, which came with the deal when Black & Decker bought Emhart for its Kwikset lock and Price Pfister faucet units, had been offered for sale twice before.
The Towson company canceled plans to auction PRC privately in 1990 and canceled a planned initial public offering of PRC in 1992, both after the company failed to command a price Black & Decker would accept.
The 1992 offering had been earmarked to raise between $331 million and $363 million. Black & Decker spokeswoman Barbara B. Lucas said PRC at that time included other businesses that were sold earlier this year for $100 million, meaning Black & Decker got a total of $525 million for PRC.
Salomon Bros. analyst Russell L. Leavitt said Black & Decker got much more money for PRC than was possible three years ago for several reasons.
"Defense valuations have improved, or at least stabilized, and as you know the market prices are higher for everything," Mr. Leavitt said. "They have a much better flow of businesses, less of it from [the Department of Defense], so the prospects were better. They also improved their cost position in that business."
A key gain was a late 1992 deal, awarded by the Pentagon, to pay PRC between $1.7 billion and $2.9 billion over nine years to buy, integrate and maintain government com-puter systems for military and civilian agencies. PRC also won a deal worth up to $500 million from the National Weather Service to develop new forecasting systems and a deal to automate the U.S. Patent Office.
McLean, Va.-based PRC is active in management consulting, business process re-engineering, systems engineering and systems integration, Ms. Lucas said. Its revenues were $883 million in 1994, but it posted operating earnings of only $37.2 million, making it less profitable than Black & Decker's core businesses in consumer home improvement tools and commercial/industrial products.
"We understood from the beginning that PRC was not a strategic fit with Black & Decker at all," Ms. Lucas said. "It's information technology and services, where our other businesses are manufacturing and marketing oriented."
More than it wanted a computer business, Black & Decker wanted to reduce debt. After buying Emhart, the Towson company struggled under a debt load that topped $4 billion. Its bond ratings fell to junk levels, and its stock price fell from $23 in September 1989 to $9.25 by September 1990.
By Sept. 30 of this year, Black & Decker had reduced its debt load to $2.45 billion. The bonds now have a low investment-grade rating, but Ms. Lucas said Moody's Investor Service had put the bonds on its CreditWatch list for a possible upgrade before the announcement, which the company made after the stock market closed for the day.
Black & Decker stock closed at $35.375, up 12.5 cents. The shares have risen from a low of $22 a year ago tomorrow.
"They're making lots and lots of progress," said Mr. Leavitt. "This is a big step."
