The Rising Influence of Rising Affluence

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ITT: The Ever-Shrinking Conglomerate

[This piece from the NYT’s DealBook blog, profiles the history of the company once known as International Telephone and Telegraph.]

http://dealbook.nytimes.com/2011/01/12/itt-the-ever-shrinking-conglomerate/

›January 12, 2011, 9:35 am
By JEFFREY CANE

The news that ITT is splitting into three companies is a coda to what has been perhaps the biggest and longest-running fragmentation of an American corporation ever.

What is being broken up is one of the companies that emerged from a three-way split of a $25 billion conglomerate in 1995: ITT Industries, which changed its name to ITT in 2006. That $10 billion company will now spin off its water and military information technology businesses.

Decades ago, however, the company called ITT was a very different, much larger beast, with a dizzying multitude of businesses: hotels, insurance, rental cars, grass seed, frozen foods, bread and billboards.

Indeed, ITT was the very model of a multinational conglomerate in the 1960s and ’70s. It was a corporate structure that was hailed at the time by Wall Street and management experts, but its work with governments often made it a target of political criticism in the United States and abroad.

The idea of the conglomerate was honed by Harold Geneen, who took the reins of the company in 1959, when it was International Telephone and Telegraph (founded in 1920.) Mr. Geenen, The Economist wrote in his 1997 obituary, “postulated that a company could successfully invest in any sort of business anywhere. The company imposed discipline on those units by setting strict financial targets; and kept on growing by acquiring new firms with its own highly-rated shares.”

Under Mr. Geneen, ITT became an incredible deal-making machine, acquiring a company a week at one point. ITT ended up owning 350 companies in 80 countries and was one of the largest industrial companies in the United States.

Many deals were done with Lazard Frères at Mr. Geneen’s side. The close relationship between the conglomerate and the investment bank helped make Felix Rohatyn’s name early on, and he served as a director on its board. Mr. Rohatyn describes this history in his recent book, “Dealings.”

Rand Araskog succeeded Mr. Geneen as chief executive in 1977. With the conglomerate falling out of favor and investors demanding greater focus by companies, Mr. Araskog began the process of streamlining the sprawling empire, culminating in the 1995 split.

What will be left of ITT after the spinoffs announced on Wednesday will be an engineering company with pro forma revenue of $2.1 billion.

And who is advising ITT on its latest restructuring? Lazard, of course, along with JPMorgan Chase.‹