Speculation on Wall Street yesterday was that Westinghouse Electric Corp. will make a formal bid for CBS Inc. within a matter of days, and that it may sell off its big, Linthicum-based defense arm to help pay for the network.
Late in the afternoon CBS' shares were up $1.625 in heavy trading before closing at $71.25, a gain of 25 cents for the day. Over the past four trading sessions the stock has risen 8.6 percent.
Westinghouse shares, on the other hand, dropped 50 cents to close at $13.125, amid concern that the rumored $5 billion transaction would add to the debt that has threatened the company's survival in recent years. Westinghouse's directors have been called solidly behind Chairman Michael H. Jordan in favoring an acquisition of CBS.
Just where Westinghouse's local Electronic Systems Group fits into the negotiations is uncertain.
While one stock analyst who follows Westinghouse said it would make good sense to sell the Northern Anne Arundel County division, which ranks as Maryland's largest manufacturing employer, another analyst's message to the 9,500 Maryland employees was: "Don't sweat it," such a sale is very unlikely.
"We're not making any comments," said Jack Martin, a spokesman for the local division.
In Pittsburgh, headquarters spokesman Christopher Newton said: "There's a lot of speculation going on, and we just can't comment on it. The speculation, naturally, will mention the core businesses that Westinghouse is involved with. The operation there [Electronic Systems] is one of them. But it is all speculation at this point and we can't comment on it."
Gladys Greene, president of Local 1805 of the International Brotherhood of Electrical Workers, was busy yesterday afternoon preparing a bulletin for union members at the Linthicum complex.
But there was little she could say. "I'll tell them that the news reports are under investigation and as soon as I have some concrete information they will be informed," she said.
Asked about the mood of workers, Ms. Greene responded: "If you think there is mass madness going on, it is not happening. People are curious," she added, "That's the word I would use. They are not nervous."
Published reports say that Chemical Banking Corp. and J. P. Morgan & Co. have each agreed to provide Westinghouse $1 billion in funding to help finance a bid for CBS.
Westinghouse is likely to sell an additional $1 billion in assets to pay down debt, though they won't be sold to complete the purchase, the Wall Street Journal reported.
On another front, Reuters news service reported that Westinghouse will soon announce the $550 million sale of its real estate unit.
Reuters quoted sources close to the company as saying the real estate division's sale was a sign that the pieces of the financing puzzle may be falling into place for a deal that could mean a total breakup of Westinghouse.
Richard A. Henderson, an analyst who follows Westinghouse for Pershing Inc. in Jersey City, N.J., said the breakup could include sale of the local defense unit.
"If you look at it logically," Mr. Henderson said, "and say Westinghouse is going to be acquiring CBS and they have this Electronic Systems business and they don't have the money to finance the acquisition of CBS, it would kind of suggest that something will be done in the electronics area."
Although Electronic Systems last year acquired Norden Systems Inc., the defense electronics arm of United Technologies Inc., Mr. Henderson said there will be more consolidation within the defense industry and Westinghouse "will likely be a seller as opposed to being a buyer."
But Nicholas P. Heymann, an analyst with Nat-West Securities Inc. in New York, said it would not make sense for Westinghouse to sell its defense business.
Based on recent industry acquisitions, he said he believes that Westinghouse would receive only $2 billion to $2.25 billion for the Linthicum-based operation, which is expected to generate $275 million to $300 million in cash flow this year.
Mr. Heymann said it would be more likely for the company to sell something less, like its power generation business, which is expected to generate cash flow of $150 million to $200 million.
"Don't worry," was Mr. Heymann's advice to local workers concerned about a sale, "the numbers don't work."
"Besides, you guys haven't been the problem" at Westinghouse.
Mr. Heymann said the strong rumor within the industry is that the Electronic Systems Group will form a joint venture with another defense operation. "The name I keep hearing over and over and over," he said, is Rockwell International Corp.