Document vVj2ObwLZoqB1dNwR6dNX62EE

'5 ALL STKLE.T JOURNAL, nx/r/ - inrxday, ntcemhtr 31, 1980 IGAF Plans Sale Of 8 Units, Sees- 4th Period Loss , (2oS = | Businesses Made Up 45% of Sales Last Year; Analysts Are Surprised by- Action By Ann Huchey Stuff flvyorier nf Tut \Vai.i. STto-.tri JovhNAf, NEW YORK-GAF Corp., in a move that surprised many observers, said that it wants to sell eight businesses that accounted for about 45% of its sales Inst year and that it will take a "major" loss in the fourth quar ter. GAF's chairman, Jesse Weiner, said at a news conference yesterday that the com pany intends to concentrate on its largest and most profitable operations, building ma terials and specialty chemicals. The busi nesses up for sale include commercial blue printing, commercial photography.(Tiooiing) vinyl siding, and a classical-music rjItTtrstation in New York. The company has established a S265 mil lion teserve to cover possible losses and costs of the sell off plan of which S50 million is designated to cover pension fund obliga tions. That $265 million represents the big gest loss GAF thinks it could incur from the sales. Actual losses could be somewhat less, and Mr. Werner said a tax benefit of S75 million related to the reserve will be avail able against future earnings. - GAF's earnings in 1979 fell 7% to $2X7 million, or $1.62 a share, from $30.4 million or $1.97 a share, in 1978. The slide has con tinued this year, with third quarter earnings falling 61 % to $4 million, or 23 cents a share from $10.3 million, or 59 cents a share, a year earlier. "In the present economic climate, the company can't achieve the cash flow neces sary in the next few years to support the concurrent growth of al! these businesses," said Mr. Werner. He cited high interest rates as a major factor in the decision. "Interest on all our debt will run approxi mately $30 million this year, consuming a large part of our operating profit and deny ing funds required for normal corporate pur poses," he said.' Mr. Werner said that the businesses the company is keeping accounted for sales of S675 million in 1979 and 2bout 92% of direct \ First Manhattan Co. said. "They have not been bold in the past." In 1977 GAF sold Its consnnipr photographic business, advertised by actor Henry Fonda, but. Mr. Fernandez said. "That was little more ihau a teaspoonful." However, al the time the sale was her alded as the move that would revive the company. Analysts have believed for several years that the company was stretched thin, spend ing too little money on too many enterprises. Said one observer: "Jesse ran this thing like a fietdom. These were his little hobbies. This baby was just sitting there waiting to happen." That observer and others suspect that someone other than Mr. Werner forced the decision. "In my own mind there is some relationship with the coming on board of the new president," said analyst Jack Kav.inagh of Merrill Lynch, Pierce. Fenner ti Smith Inc. Richard Fleming, the 56-year-old presi dent. arrived at GAF last summer from Air Products & Chemicals Inc., where he was an executive vice president and director. GAF spokesmen note that a study that led to the decision to sell the eight units began be fore Mr. Fleming's arrival. Mr. Werner, who is 64 and is expected to retire next year, has been with the company since 193S. He became chief executive offi cer in 1962, when GAF was still in the hands of the government. In early 1942 the com pany was taken over by the government and administered by the Office of Alien Prop erty. GAF became publicly held in 1965. The move tu sell off businesses as well as the expectation that a new management [ team wall be in charge soon pleases Wall Street observers. "On balance it's a plus. 1 would have to think their earning power is greater than they had before." said Merrill Lynch's Mr. Kavanagh, who is heartened by Mr. Werner's assurances (hat the 20 cent i quarterly dividend won't be cut. The businesses they have left are good. It's very positive. They got rid of almost all the problems," said Mr. Fernandez. Mr. Werner said potential buyers, both ' domestic and foreign, have expressed inter1 est in the businesses being offered for sale. The proceeds will go to reduce debt and to expand retained operations. Mr. Werner spoke of "the wrenching decision" and was overheard after the news conference ex pressing particular regret over the loss of the classical music station WNCN. Earlier . he said he hoped WNCN will be bought by . an enterprise that "will cherish this indej pendent, tax-paying, nonsubsidized cultural I institution." GAF bought WNCN in 1975 af; ter it had been transformed by its former owner into a hard rock station.