Running Out Of Juice
Rowen, James
Running Out Of Juice This is the tale of a merger that went badly. There's nothing particularly unusual about what happened, but it's sometimes case to forget that behind all the split-second...
...The combination of additional bureaucratic layers and unfamiliarity with t he product was lethal in such a quickly changing industry...
...And once Rayovac's market share dwindled, Inco refused to pump in enough new money to catch up with the competition, in part because the merger fight had, as usual, caused the stock of the target company to be overvalued...
...they had long since developed the technology to produce both alkaline cells and maintenanceti cc car batteries...
...By 1979, Rayovac had dimmed to cumber three and was slipping fast...
...Established in 1906 in Madison, Wisconsin, the firm soon became the nation's number one battery maker...
...later known as United Technologies...
...ESB fought back, bringing United Aircraft in as a white knight...
...Are they" Rayo yac...
...In September of this year, Inco found a buyer for most of the Rayovac division of ESB...
...Duracell paced the way for Dart & Kraft's consumer and commercial products division, and Eveready sales are up ten percent over last year...
...As debts mounted in 1981, Inco decided it would have to divest itself of ESB...
...a Philadelphia electrical products company...
...In the summer of 1974, Wall Street was rocked hy a hostile takeover war between blue chip giants...
...Inco capital, which had been expected to flow into ESB, did not flow as deeply as envisioned—after all, the merger might finally be disallowed and Inc.:), like many other companies involved in disputed mergers, was thus reluctant to risk throwing in a lot of money...
...The prize was ESB Inc., owner of the Rayovac battery company and manutact urer of other electrical products...
...And what buyers often want in such cases is a company with stripped-down overhead...
...Of course when you've been batted around enough, the difference between friendly and unfriendly begins to wear a bit thin...
...Mergers have affected the corporate structures of these companies, but they were friendly takeovers, involving managers who knew something about their businesses...
...But Inco could do nothing with it...
...During the 1970s, Rayovac's two leading competitors in the U.S...
...Pro ha bln not...
...The combatants were Inco, Ltd., the Canadian nickel mining giant, and United Aircraft Co...
...By World War II, the brand was as familiar as Kleenex or Hershey, and the company employed thousands of people in several states...
...The reason is a merger that turned a thriving company into the doormat of the industry...
...For four years, lawyers squabbled, and ESB's status as a subsidiary remained in doubt...
...From a 2. I 00person payroll in Wisconsin, Rayovac is nos, dtmn to:below 1,600...
...Some recall an article in the Madison capital Ames after Inco "won" the battle for Rayovac in 1974...
...Takeover Not Expected to Cut Rayovac Jobs," the headline read...
...battery production, and ESB manufactured other products that dovetailed neatlyinto Rayovac's activitie s, including auto batteries, battery chargers, and electric motors...
...Up to this time Rayovac had experienced nothing but good fortune...
...But in the financial community, the struggle over ESB was a milestone, because when ESB brushed aside Inco's unsolicited bid in July 1974, Inc() impolitely raised its offer...
...It not only angered ESB but, like most of the big mergers, raised eyebrows at the Justice Department...
...Just so you don't think Rayovac's problems are endemic to the battery industry, consider that this year both Duracell and Eveready arc Licking up profits for their parent companies, Dart & Kraft and Union Carbide, respectively...
...Even Inc() president Charles Baird conceded that "we couldn't run ESB like one of our own businesses...
...It wasn't that ESB-Rayovac technicians weren't up to speed...
...Rayovac remained number one in U.S...
...But in ordertodo that, Inco had to find a way to make the company look as attractive as possible to potential h(ncn...
...This fall it posted third quarter losses of $66.4 million, its largest losses since the Depression...
...Meanwhile, Inc() itself was taking a bath, largely because of the sad state of the metals and minerals industry worldwide...
...In fact...
...home battery business, Duracell and Eveready, made great strides...
...Until 1978, the year a consent decree was finally worked out, lnco's managers didn't have time'to worry about much of anything except completing their complicated deal...
...Check the batteries in your flashlight or in your kid's electronic game...
...What the sale will mean for employment in Wisconsin is unclear, but residents are understandably nervous...
...The battery maker's trouble was not lack of R&D but too many managers," Business Week reported in early 1979...
...The first unfriendly bidding ever between two corporate giants for another firm had been joined...
...James Rowen James Rowen is a Wisconsin writer...
...It was a very friendl n, merger...
...But to no avail...
...Bn today's Bendix-Martin Marietta standards, the contest for ESB was a sandlot softball game...
...In 1957 Rayovac's owners decided to sell out to ESB (formerly Electric Storage Batteries, Inc...
...But if the new executives in charge of Rayovac had other things on their minds, the same wasn't true for the competition...
...The Inco team, meanwhile, was lew, to sec the new market trends, especially in alkaline cells...
...Rayovac would now be owned by a company with no experience in consumer products...
...So the layoffs have come quick Iv...
...Eveready jumped into first place through clever advert Hi Dimicell rocketed into second place primarily on the strength of its new, long-lasting alkaline Niue...
...But the unfriendly merger with Inco was something else...
...The parent company knew its subsidiary's business well...
...The labyrinthine management structure that resulted from the merger made it much morediffieult to bring new products to market...
...There's nothing particularly unusual about what happened, but it's sometimes case to forget that behind all the split-second Wall Street deals lie flesh-and-blood companies...
...Inc() hid the price of ES B from $19.50 all the way to $41 a snare and United Aircraft dropped out...
Vol. 14 • December 1982 • No. 10
