Chicago Tribune from Chicago, Illinois • 24

Section 2 Page 6 (fhicaflO (Tribune Saturday, February 2, 1985 Profit-taking snaps market's winning streak Rates prediction helps end 19 days of overall gains Stock Market Ftb. 1, 1985 Composite table Volume 121,138420 latum traded 2.034 1 6621 Dow Jonea Induttriala 1277.72... 500 171.63 NYSE. Index 103.23 received more orders than expected for on-premises machines to be used in its Zap-Mail service. Losers among the blue chips in-' eluded International Business Machines, off 75 cents at General Motors, down $1 at Ford Motor, off at General Electric, off $1 at and Eastman Kodak, $1.50 lower at $71.75.

Savings and loan issues, one of the strongest industry groups in January, ran into selling as enthusiasm about the interest-rate outlook waned. Golden West Financial dropped $1.50, to Homestead Financial, 75 cents, to H.F. Ahmanson, $1.12, to and Great Western Financial, 62 cents, to $27. G.D. Searle closed 25 cents lower at $59 after it said it has yet to reach an agreement to sell the company.

Searle said negotiations were continuing. The market also had to digest the news of a larger-than-expected, $4.7 billion jump in the basic measure of the money supply reported by the Federal Reserve after the close Thursday. That news increased conjecture Tuesday before falling back in the last three sessions. Declines outpaced advances by slightly less than 3 to 2 Friday on the New York Stock Exchange, ending a record stretch of 19 consecutive trading days in which gainers held the edge. Prices of government securities and bonds were mostly lower, but they closed above their worst levels of the day.

The U.S. dollar rose sharply against other major currencies in worldwide trading despite reports of market intervention by the West German and Japanese central banks. Dealers said the Kaufman forecast for higher interest rates helped boost the dollar. The dollar's advance lifted it to record highs in separate trade-weighted currency averages measured by the Federal Reserve Board and Morgan Guaranty Trust Co. Gold and silver prices were mostly lower.

Republic National Bank in New York quoted gold at $303 a troy ounce, down $1 from Thursday. On the NYSE, Federal Express shares gained $2.12, to $35.62. On Thursday the company said it had From Chicago Tribune wiree The stock market suffered its first clear-cut loss in nearly four weeks Friday as traders cashed in profits from the market's strong January advance. Brokers also blamed some of the selling on a prediction by economist Henry Kaufman of Salomon Brothers Inc. that interest rates may have hit a bottom and could rise soon.

The Dow Jones industrial average dropped 9.05 to 1277.72, cutting its gain for the week to 1.66 points. The blue-chip average reached a historic closing high of 1292.62 Chicago Tribune Chart; Bawd en 8 E. tradea that the Fed, which followed a strongly expansionary credit policy in late 1984, might now be moving toward a more cautious approach. RIM i.ai; al, i V- U.S. construction spending $330 119 construction spending rise is biggest since '50 WASHINGTON AP Construction spending rose 19 percent last year, the biggest yearly increase in more than three decades, the government reported Friday.

The Commerce Department said spending on new construction projects totaled $311.9 billion in 1984, up from $262.2 billion in 1983. It was the biggest gain since a 26 percent increase in 1950 and was much higher than analysts had expected when 1984 began. "It was an excellent year, and we think 1985 will show more improvement," said Michael Sumichrast, chief economist for the National Association of Home Builders. Sumichrast predicted that construction spending would rise 8 to 10 percent this year. "There are a lot of building projects in the pipeline, and builders are very bullish," he said.

The big 1984 gain was powered by strength in the private sector, where building activity rose 21 percent to a total of $256.2 billion. Government construction projects were up a smaller 10 percent, hitting a new record of $55.8 billion. Spending on housing construction was up 21 percent in 1984 over the 1983 level, with single-family housing rising 15 percent and apartment construction jumping 30 percent. Nonresidential construction increased 27 percent, with shopping centers and similar commercial development growing 53 percent in 1984, the biggest increase of any category. Other strong construction gains were posted by office buildings, up 27 percent over 1983 levels; industrial construction, 12 percent; and churches and other religious buildings, 23 percent.

On the government side, highway construction rose 19 percent, aided in part by increased revenue from the 5-cent-a-gallon gasoline tax, which took effect in 1983. In billions of dollars; -seasonally adjusted R-r annual rates Revised I I LJ I I I I Ll uJ 320 310 i 300 290 280 270 260 FMAMJ JA SONDJ 1984 1985 Chicago Tribune Graphic; Source: U.S. Department of Commerce For December, construction spending was at a seasonally adjusted annual rate of $318.7 billion, a 0.9 percent gain from the November level. After taking out the effects of inflation, the annual increase in construction spending in 1984 was 14.7 percent. This was the biggest inflation-adjusted gain since a 24-percent increase in 1950.

I ft Business ticker Peoples Energy net income up Thanks to rate increases granted last summer to two Peoples Energy Corp. gas utility subsidiaries, the company reported a 32 percent increase in the first quarter's consolidated net income. For the quarter ended Dec. 31, Peoples Energy reported net income of $19.1 million, or 60 cents a share, up from $14.5 million, or 46 cents a share, a year earlier. Operating revenues of $421.6 million advanced 4.9 percent from $401.8 million.

In citing the effects of last summer's rate hikes, Chairman Eugene A. Tracy noted the higher rates were designed to produce $69.7 million in additional annual revenues. The rates were effective last September for Peoples Gas Light and Coke Co. and North Shore Gas Co. Tracy also said the quarter's results were offset somewhat by higher operating costs and decreased sales.

The impact of weather was about the same in the 1984 and 1985 fiscal first-quarter sales periods, the company said. Multigraphics talks with ATF The Multigraphics division of AM International Inc. of Chicago is in talks with ATF-Davidson, a Massachusetts-based unit of White Consolidated Industries, on a cooperative marketing and distribution of certain printing products of each firm. There have been recent rumors that AM was in talks with another firm, which led to speculation that the company, which emerged last year from Chapter 11 bankruptcy proceedings, might be a target for a takeover. AM stock was heavily traded Thursday and Friday on the American Stock Exchange.

An AM spokeswoman said Friday that the company "knows of no reason for the activity in the stock." IH begins employee cutbacks International Harvester Co. has begun dismissing 100 to 125 workers in the Chicago area in the first round of a cutback that will reach 400 to 500 jobs over the next few months, a spokesman said Friday. The cutbacks at Harvester, a Chicago-based truckmaker, came as executives at Tenneco tractor unit welcomed hundreds of ex-Harvester workers at several plants and offices in Illinois. Tenneco, a Houston-based oil and gas concern, closed its $430 million purchase of Harvester's farm-equipment division Thursday and is merging the operations with its J.I. Case Co.

subsidiary. The Harvester spokesman said the first-round dismissals began Thursday. Chairman Donald D. Lennox told The Tribune earlier this month that Harvester's push to cut its truck-making costs would lead to 400 to 500 dismissals. R.V.

Ltd. acquires Brittany Ltd. R.V. a Chicago-based retail holding company, has acquired Brittany Ltd. for an undisclosed amount, the companies said.

R.V. owns Stanley Korshak PoloRalph Lauren and Robert Vance Ltd. stores. Brittany, with three stores in the Chicago area, was founded in 1958 in Chicago by President Joseph V. Richards.

Richards said he would be staying with the organization "through the transition," but planned afterward to be "playing a lot of golf." He said the rest of Brittany's management team planned to remain. Chicago Gear Manufacturing sold Ex-Cell-0 Corp. has sold its Chicago Gear Manufacturing Co. unit, 2823 W. Fulton to two top managers of the unit, effective Friday.

Terms of the sale were not disclosed. The new entity, renamed Chicago James manufactures gears, gear drives and speed reducers for general industry. Annual sales were about $4 million in 1984. Ex-Cell-0 said it sold the unit, which was profitable, because its product line did not fit well with Ex-Cell-O's long-range strategy. The new owners said they expect to retain all of the unit's approximately 50 employees.

Uncertainty grows over ON TV Uncertainty grew about the future of Oak Industries Inc. and its ON TV subscription television STV service in Chicago after Oak said Friday it will take an $80 million loss provision in the 1984 fourth quarter and seek to improve liquidity through a debenture exchange. Oak, a cable television equipment and subscription television company based in Rancho Bernardo, said that, as a result of the loss provision, its liabilities exceeded its assets by $23 million at year-end 1984. The provision includes writedowns and costs associated with termination of Oak's ON TV STV businesses, the related TV stations and some other businesses. Oak has an ON TV system in the Chicago area, which broadcasts to subscribers over WSNS Ch.

44. Oak has previously said it might consider selling the Chicago system. An Oak spokesman declined to say if the writedowns involve the Chicago service, although sources said the Chicago system wasn't affected. However, Burt Harris, president of Harriscope of Chicago, a 50 percent owner of WSNS, said he believes ON TV will cease broadcasting before year-end. Zeigler Coal acquisition complete The $55 million acquisition of Zeigler Coal based in Des Plaines, from Houston Natural Gas Corp.

has been completed by a group of senior managers and other investors. The transaction was financed by investors and Continental Illinois National Bank and Trust Co. of Chicago. Zeigler produces and supplies bituminous coal direct to electric utilities and industrial users from its southern Illinois mines and coal preparation plants. Goldman Sachs said to restrict Searle trading By Herb Greenberg The investment banking firm of Goldman Sachs Co.

placed G.D. Searle Co. on its restricted list Friday, Wall Street sources said. The action by Goldman Sachs, prohibiting its brokers from trading in Searle stock, was interpreted by the investment community as a sign that a sale of all or part of Skokie-based Searle is possible within' a week or two. Goldman Sachs represents St.

Louis-based Monsanto which has been rumored to be a bidder for at least one part of Searle. Often investment banking firms put a company on a restricted list if the banking firm is handling a sensitive transaction involving the company. In this case, observers believe Goldman Sachs thinks a deal between Monsanto and perhaps other companies and Searle is almost certain. Goldman Sachs officials in New York could not be reached for comment. On Friday Searle said it had reached no agreement to sell the company and could not predict whether any sale will occur.

Searle's comments were issued in response to a story in earlier Friday editions of The Tribune which said Searle had reached an agreement on terms for its long-awaited sale. The story also said details of the deal, which was believed to be valued at about $3.2 billion, could be disclosed as soon as Monday. Searle, which acknowledged that it is continuing to have discussions with parties interested in buying various of its parts, has been rumored to be sorting Continued on page 11 Phillips sees debt upj profits down in restructuring NEW YORK AP Phillips Petroleum Co. said Friday that its earnings would fall in the next two years and its debt would swell under a $3.5 billion restructuring plan it has asked shareholders to approve later this month. It also disclosed that two weeks after oilman T.

Boone Pickens Jr. agreed to drop his bid for Phillips, Pickens suggested that Phillips still might want to consider cooperating with him in an $8.2 billion, leveraged buyout of the company. Under a leveraged buyout, a company is purchased with borrowed funds and the loan is repaid by either selling off assets or using the company's income. Phillips said its directors considered Pickens' suggestion Jan. 14 but opted instead for the restructuring plan, believing it "is in the best interests of the company and its stockholders." Under the proposed restructuring, Phillips would redeem 38 percent of its common stock in an exchange of bonds and notes with a face value of $60 a share.

It also would sell up to 32 million shares to an employee stock ownership plan and would sell approximately $2 billion in assets. The assets were not identified by the company. The plan also would enable employees to increase their ownership in the company to between 33.5 and 42 percent. And with companion by-law changes proposed by the company, that would be enough to block any hostile takeover bid in the future. The company projected that, under the proposed restructuring, earnings, which rose 12.3 percent in 1984 to reach $810 million, would fall 12 percent in 1985 and slip another 5.3 percent in 1986.

But it predicted a sharp turnaround in 1987. The forecast said it expected earnings to fall to $713 million in 1985 and to $675 million in 1986 before rising to $859 million in 1987- level that would be 6 percent higher than 1984 results. Phillips projected that long-term debt would rise from $2.8 billion in 1984 to $5.7 billion in 1985, then subside slightly to $5.2 billion in 1986 and $4.6 billion in 1987. Some shareholders who bought Phillips' stock at a higher price while Pickens was still pressing a $60-a-share offer have challenged the plan. Some speculators who bought Phillips stock for under $50 a share when the Pickens' offer fell through are also opposed to the plan and say they hope to get a better deal.

The plan is designed to maintain a price of $53 a share for Phillips stock, with the exchange of securities for 38 percent of the stock valued at $60 a share the remaining shares valued at $48 a share. But the proxy material cautions investors that market prices are unpredictable. Based on cash-flow projections of $2.2 billion in 1986 and a trend among large oil companies for stock to sell at more than two times cash flow, analysts said Phillips shares could be valued at $40 to $50 a share after the restructuring. I III i- -It 1 tm 1 i a i-fct0 fct- rafc a AP Laserpholo Where's the sauce? Chinese peasants string out long strands of spaghetti' originated in China. Explorer Marco Polo introduced to dry in the sun.

Made from sweet potatoes, about the Italians to the culinary delight in the form of 200 tons of pasta are produced in this rural commune. Chinese noodles when he returned to Venice from his Traditionally thought of as an Italian dish, spaghetti world travels in the 13th Century. Multimedia leveraged buyout proposed penalized by the stock market for its investments in speculative fields, like cable television. In a telephone interview, Walter E. Bartlett, Multimedia president and a member of the investment group, saidVthe offer wasn't stock market-driven, but was being made for investment reasons.

He said the buyout would offer the families and management "an opportunity to take cash for their current stock, have a sizable amount of cash for investment outside the company and buy back their present ownership in the company with a lesser amount of cash." Thejnsiders currently own about Continued on page 11 By Charles Storch The market for media properties continued to sizzle, as a management-investor group offered Friday to acquire Multimedia Inc. in a leveraged buyout with a mat ket value estimated at $500 million. Meanwhile, Taft Broadcasting said it agreed to pay $755 million for five television stations and seven radio stations from Gulf Broadcast a Dallas firm hotly pursued since it was put on the block last month. The announcement of the two deals came a day after Gannett the nation's largest newspaper company, offered to pay a surprisingly hijh $200 million for the Des Moines Register and related newspaper properties. Analysts expressed surprise about the proposed buyout of Multimedia, a diversified communication firm based in Greenville, S.C.

The bidders include Multimedia's senior executives, members of its founding families and a private investor group to be organized by investment banker Goldman, Sachs Co. Although Multimedia this week reported declines in earnings for the 1984 fourth quarter and full year from the year-earlier periods, its profit prospects were considered bright. Unlike other media i firms that went private recently in buyouts, it wasn't being heavily.