In one of the most remarkable breakups in U.S. corporate history, ITT Corp. announced yesterday that it plans to split itself into three companies and dismantle what has long been one of America's most familiar conglomerates.
Shareholders will vote on the plan this fall.
The New York-based company -- a global hodgepodge that at times has owned everything from Wonder bread to Avis rental cars -- plans to divide its remaining insurance, industrial and hotel-entertainment divisions into separate publicly held companies, which have combined annual sales of $25 billion.
While other companies have been broken up by government decree or have sold off pieces over time, ITT's plan is unique because it calls for one of America's largest companies to willingly break itself apart in one fell swoop.
ITT's breakup is further evidence that the gigantic conglomerate -- so fashionable in U.S. business during the 1960s and 1970s -- is largely a dinosaur today. It has become an enterprise that is too unwieldy in an age when corporations must be nimble and efficient, many experts believe.
Though a few big diversified companies still succeed -- notably General Electric Co., AlliedSignal and Textron -- the conglomerate overall "was a product of a particular time and place," said Robert Sobel, a business history professor at Hofstra University in New York, who has written books about ITT and other conglomerates.
ITT's proposed breakup also climaxes a 16-year effort by Rand V. Araskog, ITT's chairman, to disassemble the far-flung empire built by Harold S. Geneen, who as chairman turned a little overseas telephone company called International Telephone & Telegraph Corp. into a titan of American business. (ITT adopted its current name in 1983.)
Yet the bust-up of ITT -- which owns Sheraton hotels, Hartford insurance and Caesars World -- had been expected.
Long prodded by disgruntled investors who felt the company's stock price understated the true value of the firm's various assets, ITT had hinted for months that it might split itself up.
When the announcement finally came yesterday, investors cheered the move and boosted ITT's stock price $6.25 a share, to $115.50, in New York Stock Exchange composite trading.
The change is "going to make three much stronger entities," said Thomas Hoens, an analyst at the debt-rating agency Fitch Investors Service in New York.
The proposal calls for ITT's stockholders to receive one share in each of the three new companies for every ITT share they now hold. The new companies would be:
* ITT Hartford, the insurance business. It's the biggest of the three with annual revenue exceeding $11 billion.
* ITT Industries, which makes automotive parts, defense and electronics gear and industrial equipment.
* The "new" ITT Corp., which would own Sheraton, Caesars World, ITT's stake in Madison Square Garden and other entertainment holdings. Mr. Araskog, 63, would continue running that company.
The split would be only the latest transformation for a company that has reinvented itself countless times during its 75-year history.
During Mr. Geneen's 20-year reign, ITT gobbled up hundreds of businesses, including Continental Baking (Wonder bread), Avis rental cars and Rayonier forest products.
Like many other conglomerates of his era, Mr. Geneen typically used ITT's richly priced stock to pay for the acquisitions.
But when Mr. Araskog took over in 1979, he found the company burdened with debt. So he went on a huge divestiture program and has now shed more than 250 operations, including Continental, Avis and Rayonier.
Even so, Mr. Araskog also has struggled with deciding what ITT should be. At one time he wanted ITT to be a technology powerhouse, but that ended in the mid-1980s when it ended up selling most of its telecommunications-equipment business. More recently, Mr. Araskog sold its financial-services units (other than Hartford).