Signal Accomplishment

Signal Oil and Gas Co., having acquired companies in fields as diverse as aerospace (Garrett Corp.), trucking (Mack) and banking (Arizona Bancorporation), recently jested in advertisements that "we've thought of calling ourselves Signalgarrettmacktruckarizonabancorporation." While Signal does, in fact, plan to take on a new name that will better reflect its conglomerate status, that tongue twister will never do--if only because the company would have to keep changing its letterheads. Last week, for instance, it might have become "Signalgarrettmacktruckarizonabancorporationallischalmers."

In a deal involving some $450 million in Signal stock, the Los Angeles oil company agreed to acquire Milwaukee's Allis-Chalmers Manufacturing Co., one of the nation's leading manufacturers of electrical, construction and farm machinery. Allis-Chalmers has been the subject of takeover rumors--and heavy trading of its stock--ever since James J. Ling, the acquisitive chairman of Dallas' Ling-TemcoVought, made a pair of tender offers that Allis-Chalmers' board turned down cold last summer.

Neutral Ground. Allis-Chalmers remained vulnerable to takeover, in large part because its officers and directors held too little of its stock--less than 1%--to put up much resistance. It accordingly began casting about for a partner more to its liking (one brief suitor was General Dynamics). Finally, with a Manhattan brokerage house acting as catalyst, talks were set up in Denver with Signal President Forrest N. Shumway. The critical decision to negotiate toward merger came in October in a phone call between Allis-Chalmers Chairman Robert S. Stevenson and Shumway, who was attending a Notre Dame football game in South Bend, Ind. Signal's purchase price figures to be worth about $45 per share of Allis-Chalmers' common (last week's closing: $38.75), considerably less than the $55-$60 estimate that Ling put on his final offer. That could mean trouble for Allis-Chalmers, which has already been hit with a stockholders' suit challenging the rejection of Ling's offer; one party that expressed displeasure with the Signal get-together was Kleiner, Bell & Co., a Beverly Hills, Calif., brokerage firm believed to hold some 14% of Allis-Chalmers' stock.

But Stevenson had some compelling reasons for preferring to team up with Signal. For one thing, unlike Ling's combination offer of stock and cash, the deal with Signal is expected to be taxfree, since it involves a straight exchange of stock. Just as important to Stevenson's 121-year-old company is Signal's promise that it will operate as an independent subsidiary--and so retain its corporate identity.

With Allis-Chalmers' $850 million in annual sales, the deal, if it goes through, stands to raise Signal's sales to $2.3 billion a year. Before Shumway, now 40, a pipe-smoking ex-Marine (and nephew of Founder-Chairman Samuel B. Mosher), became president in 1964, sales were $444 million. Vowing to look into "anything that's well managed and in a growth industry," Shumway is well on his way toward making his company--whatever its eventual name--one of the nation's hugest corporations.

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