In Business This Week: HEADLINER: MICHAEL ARMSTRONG
HUGHES STRIKES GOLD IN OUTER SPACE
Suddenly, Mike Armstrong is cruising Hollywood's fast lane. On Jan. 23, a day after snagging $137.5 million from AT&T for a 2.5% stake in his DirecTV unit, the Hughes Electronics CEO fielded congratulatory calls from Viacom CEO Sumner Redstone and other media honchos.
The deal brings AT&T's clout to a satellite-to-home broadcasting service already thriving: 1.3 million households pay about $30 a month for DirecTV's 175 channels. Within months, AT&T will market DirecTV to its long-distance phone customers. It also plans to sell Hughes's DirecPC, transmitting Internet multimedia data to home computers. "By the end of the year, we will have a whole complement of services in the market," says Armstrong.
Big talk? Armstrong has delivered before. After turning around IBM's European unit, he took over Hughes in 1992. He transformed the stagnant defense contractor, boosting margins and launching promising ventures--DirecTV among them. The result: Hughes shares have climbed to $53 from $15 since his arrival.Edited by Keith H. Hammonds By Eric SchineReturn to top
NO WEDDING MARCH OF THE TOYS
CAN BARBIE AND G.I. JOE FIND happiness together? Not likely. Hasbro, Joe's parent, rejected a surprise $5.2 billion acquisition offer on Jan. 24 from archrival Mattel, maker of Barbie and Cabbage Patch Kids. The companies had been discussing a merger since April. But Hasbro's board argued that merging the world's two biggest toymakers, whose combined sales of $6 billion represent a quarter or more of the industry, would raise antitrust issues. That doesn't worry smaller rivals: "I can't say we'd be delighted, but I don't think we'd oppose it," says Tyco Toys Chairman Richard Grey. More likely, Hasbro just doesn't want to play. Ultimately, though, it may have little choice: After a string of strategic miscues, its shares have languished for three years.Edited by Keith H. HammondsReturn to top
WELLS FARGO BAGS ITS PREY
AFTER CLINGING FOR THREE months to the specter of a merger with First Bank System, First Interstate Bancorp instead succumbed on Jan. 24 to Wells Fargo's hostile bid. The $11.6 billion price tag isn't any higher than Wells's earlier offer. But First Interstate's hand was forced by big investors such as Kohlberg Kravis Roberts, sources say, and by an unfavorable accounting ruling from the Securities & Exchange Commission. "They played a game of chicken and lost," says Donaldson, Lufkin & Jenrette Securities analyst Tom Brown. That said, the losers don't make out badly: First Interstate CEO William Siart will walk away with a $4.6 million paycheck. And First Bank gets $200 million for having its friendly deal broken up.Edited by Keith H. HammondsReturn to top
BANKERS TRUST BITES A BULLET
BANKERS TRUST PUT A DARK coda on its lackluster 1995 results, agreeing on Jan. 24 to terminate disputed derivative contracts for $67 million with Air Products & Chemicals. Bankers says its fourth-quarter results reflected the settlement and added that it was pleased to put a fight with "a valued client" behind it. Now, Wall Streeters are betting on when Bankers will settle its last remaining derivatives litigation, a nasty, high-profile dispute with Procter & Gamble. Bankers and P&G representatives met on Jan. 19 but failed to reach an agreement. A trial is set for May.Edited by Keith H. HammondsReturn to top