ITT Garden Purchase Baffling Analysts Wondering about Firm's Strategy

By 1994, Bloomberg Business News | St Louis Post-Dispatch (MO), August 30, 1994 | Go to article overview

ITT Garden Purchase Baffling Analysts Wondering about Firm's Strategy


1994, Bloomberg Business News, St Louis Post-Dispatch (MO)


When Rand V. Araskog took the helm of ITT Corp. 15 years ago, the company was a sprawling hodge-podge of 275 businesses with no defined direction.

Today, after years of jettisoning operations - selling some 200 businesses - Wall Street is wondering if Araskog has lost his bearings and the old ITT has somehow come back to life.

Analysts and investors are baffled by the announcement Sunday that ITT, along with Cablevision Systems, prevailed in the auction for Viacom Inc.'s Madison Square Garden and its associated assets - the 20,000-seat arena, its sports teams, a theater and a regional cable TV sports network.

Only part of the concern is that ITT-Cablevision paid $1.075 billion, far more than the $800 million that analysts pegged as the maximum value.

The stock dropped $4.12 1/2 a share Monday to $82 because analysts are concerned that ITT has veered from its course of shedding businesses and buying back stock. "This feels and smells like the old ITT," said PaineWebber analyst Jack Modzelewski, who cut his rating on ITT shares to "neutral" from "attractive." "I wonder what in the world this company is doing, reverting back to its old ways? This acquisition doesn't make sense."

ITT hinted the Garden may not be its last purchase. "We have produced 15 percent to 20 percent growth in our bottom line," chief financial officer Robert Bowman said. "But we also want to improve our top line growth as well. To achieve that growth, we need to acquire companies."

ITT says it bought the half stake in the Garden because it is trying to expand its leisure and entertainment business. …

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