Mobil Selling Montgomery Ward in $3.8 billion LBO CX Filed mfstfpasn
NEW YORK (AP) _ Mobil Corp. said today it has agreed to sell its Montgomery Ward department store division to a management-led investor group in a $3.8 billion leveraged buyout.
Mobil said in a statement the investor group would pay more than $1.5 billion in cash for Montgomery Ward and assume $2.3 billion of its debt.
It has been reported for some time that Montgomery Ward President Bernard Brennan - who is credited with turning the retailer around in recent years - was negotiating with Mobil to acquire the 115-year-old department store company.
Brennan said in the statement issued by Mobil that GE Capital Corp., a unit of General Electric Co., was a substantial investor in the leveraged buyout.
In a leveraged buyout, investors borrow heavily to buy out a company and then pay off the debt with that company’s cash flow or the sale of its assets.
Under the buyout proposal, Montgomery Ward would sell its credit card operation to GE Capital to help pay off $1 billion in debt, Brennan said later at a news conference in Chicago.
He said there are no plans to sell other assets or lay off any employees.
″We see no need at this time to reduce employment. For example, in Chicago, we’ve added 300 jobs in the last six months,″ Brennan said.
Mobil, which bought Montgomery Ward in 1976, has wanted to sell the chain for some time.
″It’s a business that we don’t know too well,″ and the oil company believed it would be better to concentrate on its core businesses, said Mobil chairman Allen E. Murray.
Murray said in a telephone interview today Mobil began receiving inquiries about Montgomery Ward last summer, but he declined to identify the other parties interested in buying the retailer.
Mobil stock jumped $1 to $44.62 1/2 in early New York Stock Exchange trading today.
The retailer, the nation’s eighth-largest, lost money in the early 1980s, but under Brennan has restructured and returned to profitability. The company laid off employees, closed its Jefferson Ward discount stores and other unprofitable branches and shut down the catalog division that dated back to the company’s early days.
At the same time, it has moved into specialty retailing. Montgomery Ward has begun opening freestanding appliance and electronics stores, and is converting its department stores to emphasize specialty formats including electronics, home furnishings and recreational items.
Last month, Montgomery Ward announced it was realigning its field office management to create new specialty retailing positions.