Sunbeam chief eyes big move Dunlap seeks advice of Morgan Stanley on sale or acquisition


October 24, 1997|By Sean Somerville | Sean Somerville,SUN STAFF Bloomberg News contributed to this article.

Sunbeam Corp. Chairman Al Dunlap said yesterday that he had hired Morgan Stanley & Co. to advise the Delray Beach, Fla.-based company on buying other companies or selling itself, and speculation immediately focused on Towson-based Black & Decker Corp.

"The odds are weighted heavily in favor of Dunlap making an acquisition rather than selling the company," said Michael Chren, portfolio manager with Eagle Asset Management, which holds 414,575 Sunbeam shares. "Black & Decker is at the top of everybody's list."

Barbara Lucas, a Black & Decker spokeswoman, said there have been two rumors circulating that either one would buy the other. "First of all, we have no interest in acquiring Sunbeam," she said. "Second, there has been no contact between our company and theirs."

Black & Decker shares fell 56.25 cents, closing at $40.625, revealing little on a day when the Dow Jones industrial average fell 188 points. Sunbeam shares fell 12.5 cents to $48.25.

Dunlap, who earned the nickname "Chainsaw Al" by making deep cuts at other companies, cut half of Sunbeam's 12,000 jobs in November and unloaded 87 percent of a 5,000-item product lineup to focus on the Sunbeam and Oster lines.

Other potential targets of Sunbeam would likely include Rubbermaid Inc. of Wooster, Ohio, and Tupperware Corp. of Orlando, Fla. -- makers of storage containers whose stocks have fallen sharply from their highs this year, Chren said.

Maytag Corp., based in Newton, Iowa, has a strong brand name but its business of making big-ticket home appliances makes it a less likely target, he added.

A purchase of Culligan Water Technologies Inc. would give Sunbeam a larger share of the market for water purification products, but the Northbrook, Ill.-based company's market value about $1.1 billion makes it too small for Dunlap, who is looking for an acquisition that would give Sunbeam a "quantum leap," Chren said.

"We will pursue whatever course serves best to enhance shareholder value," Dunlap said.

Sunbeam has a market value of $4 billion; Black & Decker's is $3.8 billion. Schren said Sunbeam could slash costs at Black & Decker, while bolstering sales of the power tool and accessories maker.

But an analyst who insisted on anonymity quoted Dunlap as saying that he wouldn't be interested in Black & Decker.

The rumors come as Black & Decker struggles to lift the fortunes of its Shelton, Conn.-based household products division, Sunbeam's direct competitor and one of Black & Decker's weakest performers since the demise of the hit SnakeLight product last year.

A source who insisted on anonymity said large investors who view the division as a drag on Black & Decker's stock are pressuring Chairman Nolan Archibald, the chief executive, to take action. "Nolan is scratching his head really hard to figure out what to do with it," the source said.

Black & Decker said it's not trying to sell the division, which accounts for about 16 percent of the company's annual sales of $4.9 billion. But Lucas wouldn't rule out the possibility of an eventual sale.

She said from time to time the company considers the sale of its noncore businesses. "In the interest of improving shareholder value, strategically we would consider selling any business," she said.

Cliff Ransom, a NatWest Securities analyst, said a merger with Sunbeam would make no sense for Black & Decker. "As smart as Morgan Stanley is, I can't see how Sunbeam's balance sheet can support the acquisition of Black & Decker without diluting itself into oblivion."

He also said it would be unwise for Black & Decker to increase its presence in household products by pursuing Sunbeam. "Household products is the least attractive part of Black & Decker's portfolio," he said. "There is no way they should get into it unless they acquire Sunbeam at an astonishingly cheap price. It just doesn't make any sense to me."

Pub Date: 10/24/97

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