LONDON -- Lord Hanson, who as chairman of Hanson PLC has built a reputation as one of the business world's great wheeler-dealers, said yesterday that he would spin off 34 of the conglomerate's smaller U.S. subsidiaries into a new, debt-laden company.
The plan raised questions about whether Lord Hanson was trying to shed the company's underperformers and their debt. But Hanson executives insisted that the companies to be spun off include many that are growing strongly and could thrive under the added managerial attention and investment that the new structure could provide.
The new company, to be called U.S. Industries, will include such well-known brand names as Jacuzzi whirlpools, Farberware cookware, Ames garden tools, Rexair vacuum cleaners and Tommy Armour golf clubs. The 34 companies had sales last year of $3 billion -- which would have placed it about 162nd on the Fortune magazine list of the 500 largest American industrial companies. The companies' operating profit was $252 million.
But U.S. Industries will start life with $1.4 billion in debt, a nearly backbreaking level for its size. Its designated chairman and chief executive, David H. Clarke, who is now chief executive of Hanson's operations in the United States, said he was confident the company could cover its loan payments, but only by paying no dividends and by selling some businesses.
U.S. Industries has established a $1.65 billion credit line with a bank consortium headed by Bank of America, of which $1.35 billion will be drawn down and paid to Hanson to cover internal debts and other liabilities of the 34 companies.
Another $50 million will go to paying fees related to the transaction, which requires shareholder approval.
For Hanson, the deal has clear benefits. It will reduce the British-U.S. conglomerate's debt by $1.35 billion, giving it greater financial muscle to make more acquisitions in other areas.
The deal also will allow Hanson, a combination of industrial holdings assembled since the 1960s through an unending series of acquisitions and divestitures, to focus more on seven core businesses: chemicals, coal, building materials, cranes, tobacco, lumber and propane.
The spinoff will take the form of a share distribution to current Hanson shareholders, about a quarter of whom are in the United States. Holders are to receive one share of U.S. Industries for every 100 Hanson shares they hold, or one U.S. Industries share for every 20 American depositary receipts. The company is to be listed only on the New York Stock Exchange.