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Rockwell sheds two units
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August 1, 1996: 8:34 p.m. ET
Boeing buys aerospace, defense businesses for $3.2 billion
From Correspondent Casey Wian
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LOS ANGELES (CNNfn) - The Boeing Co. announced Thursday it has agreed to buy most of Rockwell International Corp.'s space and defense businesses for $3.2 billion.
The deal is a story of two aerospace giants heading in different directions. Boeing, best known as the world's largest builder of commercial airplanes, wants more defense and aerospace business to compete with growing competitors like Lockheed Martin and McDonnell Douglas, and Rockwell's space shuttle, B-1 bomber and missile divisions fill that need.
"This was done on our part primarily because of the excellent strategic fit that the Rockwell aerospace and defense unit provide Boeing," said Phil Condit, president and CEO of Boeing.
For Rockwell, on the other hand, the sale is the culmination of an effort to leave the defense industry to concentrate on civilian pursuits like semiconductors, automation and communications.
"It is an important day because it launches the new Rockwell, a company of $10 billion in revenue and 55-thousand employees -- 20 thousand or so who are outside the U.S.," said company chairman, Donald Beall.
Under the agreement, Boeing will issue $860 million in stock and assume $2.2 billion in Rockwell debt.
The units Rockwell sold employ about 21,000 workers, 12,000 of them in Southern California, and had sales of $3.2 billion last year.
Jon Kutler, president of Quarterdeck Investment Partners, said the deal makes perfect sense for both companies. (384K WAV) or (384K AIF)
Kutler said the deal was necessary for Rockwell to make it clear to Wall Street that it is a civilian company that could be worth hundreds of millions of dollars in market value.
Both companies said the deal is not likely to result in significant job cuts. However, Boeing is in the midst of a battle with unions over plans to cut commercial airplane labor costs and shift some work overseas. Boeing said the moves are necessary to compete with international rival Airbus.
Analysts said under ideal conditions, Boeing would have preferred waiting until the labor matter was resolved before completing the Rockwell deal. But the company thought someone else would snap up Rockwell's businesses if it dragged its feet too long.
Shares in both companies rose on the news. Boeing gained 5/8 to 89-1/8 and Rockwell jumped 2-3/4 to 55-1/4. 
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