Moving to be a broadcasting pure play, Westinghouse Electric Corp. agreed to sell its power generation business to Siemens AG for $1.53 billion. Westinghouse’s remaining industrial assets, including a nuclear power business and a government operations unit that handles nuclear material for the U.S. government, will be shed by the middle of 1998. The sale is part of an elaborate restructuring in which Westinghouse will change its name to CBS, a transformation that began with its 1995 acquisition of the television network. The company abandoned an earlier plan to spin off its industrial assets. Ironically, after $25 billion in deals, including both acquisitions and divestitures, the company is refocusing on an industry that it helped pioneer years ago; in 1920, the company’s KDKA station in Pittsburgh produced the country’s first commercial radio broadcast. Scaling back its ambitious global expansion plan, waste-handling company Browning-Ferris Industries Inc. agreed to sell its international operations to Sita SA, a unit of France’s Suez Lyonnaise des Eaux SA, for $1.4 billion. Browning-Ferris will receive $1 billion in cash and a 20% stake in Sita. Browning-Ferris said that it will use sale proceeds to pay down debt and fund a recently announced share-repurchase program. The company also said that it may use some of the cash to finance acquisitions in domestic markets. Sita’s purchase of the businesses, which are mainly located in northern Europe and the Asia-Pacific region, will make it Europe’s largest waste services company. The acquisition will boost Sita’s revenue to about $2.8 billion, which includes revenue from recently acquired operations from Waste Management Inc. Both Browning-Ferris and Waste Management had bold plans for international expansion, but complex environmental and labor laws foiled their plans and chipped away at profits. The companies found that profits from their overseas waste operations couldn’t match those of their U.S. operations. By taking a 20% stake in Sita, Browning-Ferris isn’t making a full retreat from the global environmental services market. The company believes that for companies with the right partners, the international environmental services industry offers attractive prospects. World Scene: Consolidation Spreads in Europe The planned introduction of a common European currency in 1999 has accelerated the consolidation process among major European industries. German steel giants Fried. Krupp AG Hoesch-Krupp and Thyssen AG plan a $12 billion merger that would create that country’s seventh-largest company. The plan is one of the latest in a series of large European merger announcements, and comes after Krupp failed to acquire Thyssen in a hostile takeover. Thyssen’s failed takeover bid, however, opened discussions between the companies for a much-scaled-back plan to combine their steel businesses. After further investigation of merger possibilities and discussions, Thyssen dropped its objection to a full merger, concluding that both companies, with their emphasis on capital goods, industrial services, and steel, had similar strategies for future growth. Unions were largely responsible for killing Krupp’s original hostile attempt. Workers marched to protest expected layoffs. As for the latest merger plan, IG Metall, Germany’s biggest union, said it wouldn’t object to the deal as long as there are no layoffs. The new deal has been structured to avoid layoffs but keeps open the possibility of job reductions due to early retirement. The merged company would have about $36 billion in sales. Germany’s Allianz AG outbid Assicurazioni Generali SpA to acquire Assurances Generales de France. Generali had made a unsolicited bid of approximately $9.5 billion, and Allianz came in with a friendly, higher offer of about $10.35 billion. Generali hadn’t yet sweetened its original bid. The move accelerates the rapid consolidation of Europe’s financial services industry. A combination of Allianz and AGF, which is in the process of taking over another French insurance company, Athena Assurances SA, would allow Allianz to once again become Europe’s largest insurer, a title it lost after the 1996 merger of France’s Group AXA SA and Union des Assurances de Paris SA. Bringing together Allianz and AGF would create a powerhouse with $64 billion in premium income. Allianz had 1996 profit of $1.27 billion on premium income of $43.1 billion. AGF’s 1996 premium income, including Athena’s income, would have amounted to $15.15 billion, and company profits would have been $330 million. By launching an unsolicited cross-border deal in the financial sector, Generali broke a taboo in Europe. Its offer met with resistance not only from AGF, whose board immediately rejected it as hostile and too low, but also from France’s political arena. Although the French government didn’t openly oppose Generali’s bid, it gave AGF time to prepare a defense. Back on Top Unable to find a French white knight, AGF’s chairman, Antoine Jeancourt-Gaglignani, turned to Allianz, which went out of its way to structure a deal that appears to preserve French interests. The deal is structured so that a significant portion of the company would still be quoted on the Paris Bourse, and Allianz agreed to take fewer than half of the board’s seats and to keep Jeancourt-Gaglignani as chairman. In comparison with Europe’s largest insurance companies, Allianz-AGF would lead the pack with $52 billion in premium income, followed by AXA-UAP with $50.3 billion, Zurich-BAT with $38.1 billion, and Generali with $22.9 billion. Continuing Europe’s merger mania among financial institutions, ING Group, the Amsterdam-based financial services company, made a $4.69 billion offer for the 87% it did not already own of Bank Brussels Lambert, Belgium’s third-largest bank. A combination of ING and Bank Brussels would create Europe’s 12th largest financial institution and would bolster ING’s position as market leader for financial services in the Benelux countries. BBL would continue to operate under its own name. ING expects the planned merger to increase profit by 2% in 1998, a number it expects will grow to 5% as synergies are realized. Even though the deal had not yet been approved, news of the announcement prompted smaller rivals in the region to strike alliances or find merger partners. Within hours after announcement of ING’s bid, Dutch banking and insurance group Fortis said that it would boost its stake in Belgium’s ASLK-CGER Bank to 75% from 50% in a deal valued at $985 million. Other midsize banks and insurance companies were still exploring options in light of the planned acquisition. In 1992, ING made an unsuccessful bid for BBL. The bank’s main shareholders rallied to reject the offer, but this time ING could be hard to stop. Three shareholders now own less stock than they did five years ago, and are pursuing independent business strategies. Other key shareholders are willing to sell. ING’s latest bid is also far more attractive than its earlier one. Takeover Defenses: Hostile Offers Prompt More Pills Unprotected public companies continued to shore up their takeover defenses as hostile bids became more common in 1997. Among the companies that installed poison pills in middle and late 1997 were: ARV Assisted Living; Abiomed Inc.; H.F. Ahmanson; AmeriCredit; Anchor Bankcorp; Aspen Technology; BEI Electronics; Barrett Resources; Bellwether Petroleum; Cameron Ashley Building Products; Cash America International; ChoicePoint Inc.; Coram Healthcare; Corrpro Cos.; Cytyc Corp.; DT Industries; DTE Energy; Data Transmission Network; Farm Family Holdings; First American Financial; First Indiana; Hawaiian Electric Industries; and Highwoods Properties. Also: Ico Inc.; Lone Star Steakhouse & Saloon; Maxxim Medical; Micron Corp.; Merit Medical Systems; Monterey Resources; Noble Affiliates; Premiumwear Inc.; Progressive Bancorporation; Rocky Shoes & Boots; Scientific Games Holding; Secure Computing; ShowBiz Pizza Time; Station Casinos; Swift Energy; Toll Brothers, Trigon Healthcare; and Union Texas Petroleum. Companies reaching public markets with shareholder rights plans in their capital structures included Group I Automotive and Waterlink Inc., sold in IPOs, and ComScope, Next Level, and UNOVA, which were spin-offs. Firms installing two classes of common stock included American Business Information, Hach Co., and Herbalife International. Joint Ventures: Alliance to Create High-Speed Modem Northern Telecom Ltd. and Rockwell International Corp. are teaming up to create a modem that will allow users to connect to on-line services much faster than they can today. The partnership calls for Rockwell, an electronics and semiconductor manufacturer based in Seal Beach, Calif., to make computer chips for the new modem; Northern Telecom, a telecommunications equipment manufacturer based in Toronto, will supply the technology that local phone companies would need have to install to make the modem work. The modem would allow phone companies to easily and inexpensively provide users with high-speed Internet connections and data transmissions. Northern Telecom has already developed a “line card” for the modem that phone companies can install at their end, avoiding the need to rewire customers’ homes. The modem would be available in late 1998. Although the line cards are now compatible only with Northern Telecom equipment, the company said it would soon license the technology so that it will work with competitors’ switches. By working together, Northern Telecom and Rockwell said that they hope to set the technical standards for one-megabit modems. Such standards enable modems from different manufacturers to communicate with each other at high speeds. Northern Telecom originally had planned to make the modem itself, but decided that it could probably increase its chances of gaining industry support if it formed a partnership with a computer equipment manufacturer. Trying to position themselves in the multibillion-dollar global cable television industry, Motorola Inc. and Siemens AG of Germany have agreed to sell cable telephone systems around the world. Under the agreement, the two companies will jointly manufacture and distribute hardware and software that television cable companies require to be able to offer telephone services to their customers. The alliance would benefit from Motorola’s Cable Access Communication System standards and Siemens’ global distribution network. Siemens will also supply telephone equipment to cable TV companies that want to compete with the national phone companies. Although the companies have emphasized a global alliance, they plan an aggressive launch in the European Union. EU legislation has forced member countries to open their telephone markets to competition by January 1998, meaning that hundreds of millions of telephone customers will be up for grabs. Siemens’s home base of Germany offers good prospects for subscribers, since it is liberalizing its phone markets, but the best prospects for the venture in the EU come from Belgium and the Netherlands, where close to 97% of households subscribe to cable TV. Washington Update Regulators Study JV Formations The Federal Trade Commission, in concert with the Justice Department, continued to study formation of joint ventures and the competitive aspects of corporate collaborations in late 1997. The FTC said the project was designed to determine whether new guidelines were needed to bring JVs into line with revised antitrust policies governing mergers and other areas. The project was being pushed at a time when the “near-merger” JV, in which subsidiaries of two or more companies are merged into a third, jointly owned concern, increasingly was being considered by restructuring businesses. A recent “near merger” was the creation of EGS Electrical Group by Emerson Electric Co., which contributed its Appleton Electric unit, and General Signal Corp., which contributed General Signal Electrical Group. Newly formed EGS manufactures a broad range of basic electrical products, including fittings, connectors, outlet boxes, lighting equipment, enclosures, and controls. The strategy behind many “near mergers” is development of a business with significant market share in a mature or contracting market. It also can be used as an exit mechanism. In a recent transaction, Carlyle Group LP agreed to acquire United Defense, producer of military vehicles and artillery systems which was cobbled together from the defense businesses of FMC Corp. and Harsco Corp. Out the Window: Trinity Industries Ends Railcar Deal Trinity Industries ended negotiation to acquire American Railcar Industries from financier Carl C. Icahn because the two sides could not agree on terms. Trinity, Dallas-based maker of industrial and transportation products, had tentatively agreed in August to acquire American Railcar of St. Louis for about $300 million. Talks ended because Trinity could not clearly distinguish American Railcar’s assets from that of its parent, ACF Industries, which in turn is a subsidiary of Icahn Holding Corp., or structure an acquisition of just those assets. Trinity plans to continue to seek acquisitions. Resource Bancshares Mortgage Group Inc. and Walsh Securities Inc. terminated their $369 million merger plan. Resource Bancshares, based in Columbia, S.C., agreed in April to acquire Walsh. Questions about loans issued by Walsh stalled the deal. Walsh says that it plans to pursue its growth plans independently. Cognex Corp. rescinded its $105 million bid to acquire Applied Intelligent Systems Inc. The decision came after Cognex learned that Applied Intelligent could possibly lose business from its major customer. As result, Cognex no longer believed that Applied Intelligent would generate the revenue and profits that it had anticipated when making its offer. Cognex, based in Natick, Mass., designs and manufactures machine-vision systems computers used to inspect manufactured products. Applied Intelligent is a machine-vision maker based in Ann Arbor, Mich.