Hands Off

RCA to Bendix: No Thanks

For more than a year, William Agee, chairman of Bendix Corp. (1981 sales: $4.4 billion) has been shopping for a high-technology company to buy with Bendix's $570 million cash trove. But when Bendix revealed last week that it had quietly acquired more than 5% of the stock of RCA Corp. (1981 sales: $8 billion), the ailing conglomerate reacted like a tough old dowager who had just been propositioned, cutting loose with the kind of language not normally used in corporate communications.

RCA, which reported an 83% drop in profits and slashed its dividend in half this month, suggested that Agee keep his hands to himself. In a press release, RCA harrumphed that the Bendix chairman "has not demonstrated the ability to manage his own affairs, let alone someone else's." The slam was an obvious reference to the close relationship between Agee, 44, and Mary Cunningham, 30, who became a Bendix vice president for strategic planning just 15 months after joining the company and then resigned amid rumors that she and Agee were romantically linked. In another broadside, RCA Chairman Thornton Bradshaw noted that his firm is engaged in the delicate maneuver of deciding which businesses to sell and which to keep to become more profitable. Said he: "This is precisely not the time for us to permit anyone to attempt to meddle with or in any way destabilize the effort under way now."

Bendix insisted all along that it planned to buy no more than 9.9% of RCA's stock, and that the shares it now owns are for investment purposes only. At week's end Bendix acknowledged holding 7.3% of RCA shares outstanding, worth about $106 million at current prices. The Michigan auto parts, aerospace and electronic equipment maker said it would stop there for at least 30 days, and would give 48 hours' notice before buying more shares.

Bendix's unsuccessful courting of RCA had been going on for months. According to one source, Agee first approached Bradshaw last September with a merger proposal, but "Bradshaw threw him out of his office." Bendix has confirmed that Agee discussed an investment in RCA at the meeting. Last week, when Agee returned to reveal the Bendix purchase, Bradshaw reportedly told him that "there were going to be no punches pulled and that they [RCA] were going to drag in his personal life" if Agee persisted. Bradshaw himself has declined comment on the report.

Analysts, meanwhile, noted several possible motives for the Bendix acquisition. Agee has repeatedly expressed an interest in acquiring a high-technology firm, and may have been attracted by RCA's electronics and communications businesses, which make computer microchips, space satellites and other sophisticated equipment. On the other hand, Agee may simply have been intending all along to hold RCA stock in hopes of profiting from a future rise in price. In fact, no sooner did the word of Bendix's investment hit Wall Street than RCA's stock rose 7/8, to $20 a share. It closed the week by dropping to 19 1/4.

Over the long haul, Bendix may indeed have been wise to buy into RCA, despite the unusually tart reaction. The only risk for Bendix is that RCA's price will fall. For that one chance of failure, however, there are several of success. Says Analyst James Magid of L.F. Rothschild, Unterberg, Towbin: "Bendix just put its money on the table and now can sit back and wait. The long-term value is there."

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