Hughes in Public

The prospectus that arrived at the Securities and Exchange Commission last week was illustrated with color pictures of dragon-teethed drilling bits --the applicant's main product. It might have been just one of dozens of similar documents submitted by firms before their stock can be sold to the public --except for the name. The Hughes Tool Co., crown jewel of the Howard Hughes financial empire, was up for sale. Hughes inherited Toolco in 1924 at the age of 18 from his father, who had invented a triple-headed conical drilling bit that revolutionized the oil-drilling business. The company became the cornerstone upon which the ambitious young Hughes built one of the largest private fortunes in the world.

Now the Oil Tool Division, along with the Hughes Tool Co. name, will be offered to the public in 5,000,000 shares of common stock for a maximum of $28 a share, or a possible total of some $140 million. The rest of Toolco's divisions will be massed under a new umbrella organization called the Summa Corp., presumably for the Latin word meaning highest. The billion-aire-in-hiding, who is reportedly living in Managua, Nicaragua, was expectably silent on his reasons for the sale. Hughes' ex-Financial Adviser Noah Dietrich speculated that "he needs cash" to shore up his Nevada gambling interests and the Hughes Airwest airlines, both hard hit in the recession. Hughes may also need a reserve against the pressure of several pending lawsuits, especially a $145 million antitrust judgment awarded against him in favor of TWA, now on appeal to the Supreme Court. In addition, Hughes is involved in multimillion-dollar damage suits brought by Dietrich and former Aide Robert Maheu. Maheu found himself "absolutely flabbergasted" by the Toolco sale, recalling that "selling Hughes Tool was the one thing Hughes said he would never do."

Hughes may need cash for a new venture rumored to be in the offing. Last July, he bought 25% of the stock of Nicaraguan Airlines, apparently with the intention of developing an international air-cargo enterprise from a base in Managua. If so, the financial phantom may only be exchanging his long-coveted crown jewel for an old love, aviation.

Whatever his motives, Hughes probably timed the sale shrewdly. After shrinking for the past few years, oil exploration is again on the rise, in large part because of the gathering energy crisis. In the first seven months of 1972 the Oil Tool Division showed profits of $5.9 million, up 133% over the same period last year. Says Dietrich: "The per-share price of $28 is as good as Hughes will ever be apt to get again."

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