New Skipper for U.S. Lines

After eight curious years, Kidde finds a flush investor

An investment in one of the U.S. oceangoing lines would seem now to be the most incautious of endeavors. Overcapacity and underpricing, especially by the Soviet Union, have driven a lot of companies to desperation. Pacific Far East Line has sheltered under Chapter 11 of the bankruptcy laws. Farrell Lines has acquired American Export Lines, whose parent company was just discharged from Chapter 11.

Nonetheless, Malcom Purcell McLean, one of the lesser known captains of American business, has just anted up $111 million to buy U.S. Lines, whose 36 vessels ply worldwide cargo routes. The seller was Walter Kidde & Co., Inc., the New Jersey conglomerate, which now has a cargo full of cash.

McLean, 64, who ranks with his friend Daniel K. Ludwig in both his reclusiveness and the boldness of his investments, was noncommunicative as usual about the purchase. "We're just buying a regular-going steamship company," he said, adding with the understatement of a shrewd Scottish laird, "I think it's a good deal for both sides."

When McLean makes these modest pronouncements the most jaded students of high-stakes business sit up and listen, carefully. His record for earning money is awesome. Starting back home in North Carolina in 1934 with a down payment of $30 for a secondhand pickup truck, McLean built a substantial trucking concern and made millions. With additional backing from Ludwig, whose National Bulk Carriers operates supertankers, McLean founded Sea-Land Service, Inc., which grew into the nation's foremost containership operation. In 1969 he sold Sea-Land to Reynolds Tobacco for about $500 million. Then through his solely owned McLean Securities Inc., he invested in a life insurance venture and real estate holdings through the South and Southwest, including Pinehurst, the 7,500-acre golf resort in North Carolina.

Shipping men reckon that McLean, who has a modest office in New York City, would like to run U.S. Lines with a minimum of interference from Washington. Some $44 million in U.S. Lines loans has been guaranteed by the Federal Government. "If McLean retired the loans," said one of his spokesmen, "he'd have a much freer hand in running the line. He just wants wheeling and dealing latitude."

There is another potential winner. For Fred Sullivan, 63, the red-haired and compulsively energetic chairman of Walter Kidde, the sale of U.S. Lines completes an eight-year saga of frustration and expensive litigation. Sullivan, a Litton Industries alumnus who ran the conglomerate with Founders Tex Thornton and Roy Ash, has built Kidde from a sleepy outfit into a diversified firm (cranes, safety equipment, sporting goods, etc.) with 1977 sales of $1.5 billion and profits of $56.7 million. But the acquisition of U.S. Lines in 1969 for $104 million in cash and stock was, Sullivan admits, a grave mistake. U.S. Lines lost $1.5 million in 1970, whereupon Sullivan began looking for a buyer for that arm of the Kidde empire. He agreed to give R.J. Reynolds Tobacco Co. a six-year option, but trustbusters blocked the sale because Reynolds had acquired McLean's Sea-Land operation.

Though U.S. Lines began earning some money in the '70s, Sullivan was determined to sell. He found a buyer in Western Union International, but for reasons publicly undisclosed, the Maritime Administration last year blocked the deal. McLean, who had resigned from Reynolds' board, then came forth with his offer, ultimately $111 million.

Flush with all that cash, Kidde now faces the fascinating problem of getting rid of it. Its stock is selling for $30.87 a share, well below the book value of $41.40. Its newly acquired $111 million, plus the fact that Kidde is a company with a steady earnings record, might stir up an unfriendly tender offer. Many a company would like to get hold of that cash.

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