ITT Industries to Sell Automotive Brake and Chassis Business
27 July 1998
ITT Industries to Sell Automotive Brake and Chassis Business To Continental AG for $1.93 Billion
Concluding Strategic Review, Company Positioned to Repurchase Common Stock,
Invest in Future Growth
WHITE PLAINS, N.Y., July 27 -- ITT Industries, Inc.
today announced a definitive agreement under which Continental AG
will acquire ITT Industries' automotive Brake and Chassis business for
US$1.93 billion in cash. This proposed transaction follows the pending sale
of ITT Industries' automotive Electrical Systems business, announced on
June 25, 1998, and concludes the strategic review of ITT Industries'
automotive Brake and Chassis and Electrical Systems businesses, announced on
March 18, 1998.
It is expected that the sale of the Brake and Chassis unit, which is
subject to U.S. and European regulatory approvals and other customary
conditions, could close by late in the third or early in the fourth quarter.
The Brake and Chassis business is based in Frankfurt, Germany. The operations
to be acquired by Continental include 16 production facilities, located
primarily in Europe and North America and six research and development
facilities, as well as the unit's interest in four joint ventures. North
American operations are centered in Auburn Hills, Michigan. The unit serves
the global automotive industry by designing, developing and manufacturing
anti-lock brake systems (ABS), traction control systems (TCS), and electronic
stability (ESP) systems, brake actuation products, foundation brake systems
and chassis modules. The unit had 1997 sales of approximately $2.2 billion.
The Brake and Chassis business employs approximately 11,000 people around the
world.
ITT Industries' after-tax cash proceeds from the sale of the Brake and
Chassis unit are estimated to be approximately $1.3 billion. The after-tax
cash proceeds from the sale of the Electrical Systems business are estimated
to be $1.3 billion.
"We're pleased with the outcome of this transaction; ITT Industries is
receiving an attractive price for the Brake and Chassis business, and the
sale, once completed, will allow us to move forward more aggressively with our
plans to continue creating economic value with our remaining businesses," said
Travis Engen, chairman, president and chief executive of ITT Industries.
"Assuming both transactions close as expected, we anticipate initiating a
stock repurchase program within the next several months. We estimate that up
to $1 billion in open market purchases could be executed by the end of 1999.
After an initial program is completed, we will evaluate additional
repurchases. The actual amount of stock repurchases will depend on then
existing market conditions and other business factors that the company may
consider from time to time."
Mr. Engen said that the balance of the proceeds from these sales will be
used to pay down debt as well as to finance external growth opportunities
within all of ITT Industries' core businesses: fluid technology, defense,
electrical connectors and automotive components.
"The actions we are announcing today further meet our long-standing
commitment to provide greater potential for growth, profitability, financial
flexibility and predictability, all aimed at creating greater long-term value
for ITT Industries' shareholders," Mr. Engen said.
Balancing the Portfolio for Profitability and Growth
Since becoming an independent company in 1995, ITT Industries has taken
major steps to strengthen its key businesses with significant potential for
enhanced profitability and growth. Through a series of strategic acquisitions
(Goulds Pumps and Kaman Sciences, among others) and divestitures (non-core
businesses primarily in automotive and fluid), the company has positioned
itself going forward with four key growth businesses.
-- Fluid Technology: ITT Industries' fluid technology business is the
world's leading provider of pumps, systems and services to move,
measure, and control liquids. The company provides a variety of
sophisticated pumps, valves and systems used worldwide in residential,
agricultural, commercial, municipal, and industrial and process
applications. Included are large pumps that control urban storm water
drainage, and submersible pumps that are used in water and wastewater
treatment plants and drain construction sites, tunnels and mines.
Other products and systems include valves for the aerospace, chemical
and energy markets, and pumps for the leisure marine, hydrotherapy,
pharmaceutical and biotechnology sectors. Following the integration of
Goulds Pumps, the business is now generating significant synergy
orders, and has total annualized sales of $2.1 billion.
-- Defense: As military forces of the U.S. and other countries are
turning to technology to increase their efficiency and support or
supplant manpower, ITT Industries' defense business has experienced
greater demand for its products and services. The unit generates
annual sales of $1.2 billion. Products include air traffic control
systems, jamming devices that guard against radar-guided weapons, night
vision equipment, sophisticated, secure, digital combat radios, and
high-tech electronics to safeguard military communications on the
Tactical Internet. Meanwhile, the defense unit is also one of the
largest U.S.-based technical and support services contractors.
-- Electrical Connectors: ITT Industries' electrical connectors are
marketed globally under the ITT Cannon brand, with annual sales of
approximately $600 million. ITT Industries is ranked as one of the top
ten worldwide manufacturers in an industry with more than 1,500
competitors. The company continues to grow its presence in the fastest
growing segments of the commercial communications markets, including
interconnects for cellular telephones, network communications, smart
cards and PC cards for laptop computers.
-- Automotive Components: This business area, with nearly a half century
of experience in its highly focused markets and more than $540 million
in annual sales, serves a number of demanding technology applications
in automotive fluid handling, brake friction materials and specialty
shock absorbers. Growth opportunities include expansion into new
geographic markets and non-automotive applications for existing
products.
Continental AG manufactures tires and industrial products through several
divisions which include Continental, Uniroyal, Semperit, Barum, General Tire
and ContiTech. The company sells its products to the original equipment
manufacturers and the replacement market, with annual sales of
DM 11.2 billion. Based in Hannover, Germany, the company employs
44,800 people.
ITT Industries (http://www.ittind.com) is a leading worldwide-diversified
manufacturing company, with 1997 sales of $8.8 billion from its primary
business segments: automotive, defense, electronics, and fluid technology.
Based in White Plains, New York, ITT Industries employs more than 58,000
people around the world.
In addition to the New York Stock Exchange, ITT Industries' stock is
traded under the symbol ("IIN") on the Midwest, Pacific, London, Frankfurt and
Paris exchanges.
Certain material presented herein consists of forward-looking statements
which involve known and unknown risks, uncertainties and other important
factors that could cause actual results to differ materially from those
expressed in or implied from such forward-looking statements. Such factors
include those set forth in Item 1. Business and Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Forward-Looking Statements in the ITT Industries, Inc. Form 10-K Annual Report
for the fiscal year ended December 31, 1997, and other of its filings with the
Securities and Exchange Commission.
ITT Industries and its subsidiaries' news releases are available at no
charge via fax and the Internet. For ITT Industries news and information on
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receive releases by fax, call 800-758-5804, extension 110006.