Out at the Ballpark

Apparently unbothered by the Supreme Court's latest merger ruling, last week the board of Cleveland-based Stouffer Foods Corp. approved Litton Industries' buy-out offer of about $100 million. For Litton, which annually sells over a billion dollars' worth of products ranging from ships to space components, the Stouffer acquisition marks a second venture into consumer goods. The first was The Royal McBee typewriter company, which the sprawling West Coast company picked up in 1964.

Although Litton is the king of conglomerates, its Stouffer deal may smack of what Justice Douglas called "product extension." Litton is, among other things, the biggest maker of microwave ovens, and Stouffer is one of the more advanced frozen-food processors. Together, they hope, to create dishes that can be baked or broiled in record time.

The process that cooks a 10-lb. roast beef in just over 60 minutes is still in its infant stages, and Litton is currently producing its ovens only for restaurants. But the company is experimenting with ovens for the Military and is working up a prototype for TWA to facilitate airborne cooking. No company yet produces food specifically for the microwave market, and this is where Stouffer fits into Litton's plan. As one Litton executive explains it: "What did RCA do to enlarge the market for color TV sets? It began a vigorous campaign to produce color TV shows, thereby creating a consumer demand for color sets."

For its part, Stouffer was ready for a merger. Though outwardly in strong shape, with 46 restaurants and six motor inns as well as its food-processing, the company has recently been having trouble keeping earnings up to snuff. As of January 31, six-month earnings were off $140,000 from the same period last year on sales of $43 million. Part of the problem, explains 65-year-old Vernon Stouffer, who parlayed his mother's recipes into millions, is cost control. "Rents and investments have grown tremendously, and higher salaries in other industries make executives difficult to obtain." Litton's resources, he points out, will be an enormous help.

Though the merger was no pushover for Litton--Stouffer's board rejected Litton's first offer last year--it seems sure that when the Cleveland company's shareholders meet within 90 days, they will agree to the proposal. Certainly Vernon Stouffer, after 43 years in the business, will not be dismayed when Litton Chairman Tex Thornton and his West Coasters take over. He will stay on as chairman, but only last year his family bought the Cleveland Indians, and, he says, "I'm looking forward to spending more time at the ballpark."

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