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Textron may shed Avco
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June 4, 1998: 9:50 a.m. ET
Review by conglomerate may lead to sale of financial services unit in 3Q
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NEW YORK (CNNfn) - Textron Inc., a sprawling conglomerate whose companies sell everything from Cessna jets to golf carts, said Thursday it is considering shedding its consumer finance subsidiary, Avco Financial Services, to concentrate on more lucrative businesses.
Textron, which is based in Providence, R.I., said it had hired Goldman Sachs to advise its executives on "strategic alternatives" for Avco. The review, Textron said, may lead to a sale or spin-off of the subsidiary in the third quarter of 1998. Textron also retained J.P. Morgan as a financial advisor.
Should the review result in Avco's sale, Textron said it would used the proceeds -- which could total $4 billion by some estimates -- for acquisitions and share repurchases. Textron has made more than 30 acquisitions since the early 1990s. At the same time, it has sold off dozens of weak-performing Avco branches.
The review doesn't include Textron Financial Corp., the company's commercial finance subsidiary.
In 1997, Avco had receivables of $7.7 billion and accounted for 18 percent of Textron's total revenues of $10.5 billion.
James Hardymon, Textron's chairman and chief executive officer, called Avco a "a strong and consistent contributor" to the company's performance over the past decade.
Nonetheless, company executives apparently are concerned that the consolidation sweeping the financial services industry, spurred by the growing popularity of credit cards, has eroded Avco's market share.
Avco serves more than 2 million customers through 1,200 branches in 11 countries and provides credit-related insurance and consumer finance services in selected international locations.
In recent months, however, Avco has seen its market share encroached upon by new, Goliath-like competitors spawned from mergers such as First Union Corp.'s $2.1 billion purchase of Money Store Inc.
Lewis Campbell, Textron's president and chief operating officer, said the company will concentrate on more profitable businesses.
"As we look at our mix of business, we see strong growth in our aircraft, industrial and automotive segments," Campbell said. "If AFS is sold, we believe we will best serve our shareholders by dedicating our resources to those segments."
Shares of Textron (TXT) closed Wednesday at 71-1/4.
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