News and Commentary: Ogden Switches Gears

Ogden Switches Gears

By Dave Marino-Nachison (TMF Braden)
September 17, 1999

Ogden Corp. (NYSE: OG), a wide-ranging conglomerate that for some time had been considering ways to refocus its efforts, today announced plans to do just that -- but it's likely not being handled in the way investors expected.

The company said it will move to sell or otherwise free itself of its entertainment and aviation businesses. In March, Ogden suggested that its restructuring would instead be handled by splitting into two separate publicly traded companies, one for its energy operations and the other comprising its entertainment and aviation divisions.

But today's news indicates that the company believes its shareholders would be better served by as little association with the latter two divisions as possible.

As such, there was little room at the new Ogden for Chairman and CEO R. Richard Ablon, who quit, the company said, "to pursue his long-standing career interests in the entertainment and aviation areas." Scott Mackin, who was president and COO of the energy business, immediately moved upstairs.

In moving to divest its aviation and entertainment operations -- which include airline support services and airport construction and management on one hand and theme parks, concessions operations, and film production on the other -- Ogden cuts loose divisions that represented nearly 40% of its income from operations and about 30% of its revenues through the first two quarters of this year.

But the energy operation -- which runs energy-generating, water, and wastewater facilities -- is still the company's largest revenue producer and operating margins there have been more reliable of late; even while falling through the first six months of 1999, they've stayed safely in double digits.

Still, the company's near-term picture isn't one of swift recovery. Third quarter results will be "substantially" below Street estimates and the board eliminated the quarterly dividend in a move to retain some cash.

It would have been nice if Odgen provided a little more insight in its press release -- there isn't a single live quote -- as the company's statement doesn't provide much in the way of perspective or explanation for its plans relative to earlier announcements. It's somewhat surprising given the comprehensive nature of past releases from the company.

As such, the information we have seems to sell investors short, particularly given that since the March announcement Ogden has continued to report various business developments at all of its divisions. The aviation division, for its part, has reported acquisitions or other deals seemingly biweekly over the last eight months or so.

It may be that a thirst for further information is what's keeping investors from reacting in much of a measurable fashion today -- the shares were unchanged as of this writing.

Odgen stock has been a disappointment over the past two years despite consistent profitability, so investors should be heartened somewhat by signs of life at the company. But without further understanding of the company's motivations and reasoning -- particularly given that they mark a change in direction from past announcements -- a little confusion would be understandable.

With Odgen historically comprising three widely disparate operations, investors' jobs have been difficult enough. News like today's would seem to indicate that Ogden is trying to make understanding (and running) the company simpler; something has nevertheless been left to be desired.

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