Baltimore Sun’s BEST party in 2 weeks

Westinghouse chief shows optimism Jordan's stock purchase, CBS bid are bets on future


PITTSBURGH -- Westinghouse Electric Corp. Chairman Michael H. Jordan made two bets on his company's future last month: a $5.4 billion bid for CBS Inc. and a $133,800 stock purchase.

The chief executive increased his Westinghouse stake by 50 percent on Aug. 23, buying 10,000 common shares at $13.38 a share, according to the Washington Service, which tracks investments by corporate officials.

Mr. Jordan's investment boosts his holdings to 30,008 shares, a fraction of Westinghouse's 399 million common shares.

Even so, the purchase is a public show of faith in the company that could help dispel doubts on Wall Street about Westinghouse's ability to return CBS to the No. 1 network slot, analysts and investors said.

"I always like to see major company officers put their money where their mouth is," said Greg Drahuschak, an analyst at Janney Montgomery Scott. "This shows confidence in himself and Westinghouse."

Mr. Jordan is saying, in effect, that borrowing $7.5 billion to buy CBS for $81 a share and to refinance debt in the wake of the acquisition is a good gamble for Westinghouse, an industrial conglomerate whose stock is languishing, analysts said.

The 59-year-old executive, who expects to complete the CBS acquisition in November, sent "an important signal" to the investment community when he bought the stock, said Nell Minow, a principal at Lens Inc., which owns less than 1,000 Westinghouse shares. The money management firm once held almost 226,000 shares.

Shareholders such as Lens grew impatient with Mr. Jordan's efforts to boost Westinghouse's stock, investors and analysts said. Since 1993, when Mr. Jordan became the first outsider to head Westinghouse, he has eliminated more than 7,000 jobs, including at its Linthicum-based Electronic Systems, and pared $5 billion of debt through asset sales.

Since 1988, Westinghouse has slashed its Maryland jobs in half, to about 8,600. Just last week it announced that Electronic Systems would lose another 1,000 jobs, with the bulk of of those cuts at Linthicum.

The company's earnings have disappointed investors amid poor performances by its nuclear energy and power-generation equipment businesses.

In the first half of 1995, Westinghouse's net income fell 14 percent to $74 million, or 12 cents a share, from $111 million, or 23 cents, in the year-earlier period.

Westinghouse shares have barely budged since the CBS agreement was announced Aug. 1. Shares have been hovering at around $14; they were $14.875 when the agreement was disclosed. CBS shares have been trading a couple of points above that day's $77.75.

"Westinghouse could be a buy again for us in the future," Mr. Minow of Lens said. "We're in the wait-and-see school like everyone else."

One red flag: Westinghouse board members haven't bought many shares in recent years. One director, Robert Cawthorn, chairman of Rhone-Poulenc Rorer Inc., bought 5,000 Westinghouse shares at $13.75 a share on Aug. 28, according to the Washington Service. Other board members didn't buy shares after the CBS proposal.

"If you believe in your company, you buy a lot of its stock," Mr. Minow said.

Mr. Jordan's bid for CBS may prove to be a smart one, analysts said.

Westinghouse Broadcasting is the parent company's star performer, posting an operating profit of $203 million on revenue of $870 million last year.

The CBS acquisition would give Westinghouse a total of 15 television stations reaching about 33 percent of U.S. households, as well as 39 radio stations.

"How many network stocks do you know of that trade at $14?" said Nicholas Heymann, an analyst at NatWest Securities Corp. "The stock's got no place to go but up."

It could reach $39 in the next 18 months if CBS is acquired, Westinghouse sells its other businesses and pays off its entire debt, Mr. Heymann said.

At the time of the CBS deal, Mr. Jordan said Westinghouse would look to sell from $1.5 billion to $2 billion in assets over the next year to year and a half to help finance the purchase. But there has been speculation that Westinghouse may sell all its businesses except broadcasting.

Other analysts said Westinghouse shares could rise to $18 to $20 in the next 12 months, if the company completes its CBS acquisition as expected.

Meantime, Mr. Jordan's Westinghouse stock holdings could increase considerably.

Under his 1993 employment agreement, Mr. Jordan received options to buy 750,000 shares at an exercise price of $15.44 a share and 250,000 shares at $26 a share.

In January 1995, Westinghouse granted Mr. Jordan options to buy 85,862 shares at an exercise price of $13.81.

Mr. Jordan opted to receive those stock options in lieu of about half of his $700,000 cash bonus for 1994, the company said in its last proxy statement.

Mr. Jordan didn't exercise stock options when he purchased the 10,000 shares last month, a Westinghouse spokesman said.

Copyright © 2019, The Baltimore Sun, a Baltimore Sun Media Group publication | Place an Ad