USX has little time to stave off takeover

Rattling off a long list of restructuring proposals recently, USX chairman David M. Roderick observed, ``The possibilities are endless.'' But time may not be.

Financier Carl Icahn continues to threaten to buy the oil and steel giant for $31 a share, or $8 billion, unless it radically alters operations to increase market value. Mr. Icahn already owns upward of 11 percent.

Pressure is also building for a settlement of the three-month-old work stoppage by the steelworkers union. The two sides sat down two weeks ago for the first time since July.

Major automotive and appliance customers will take their first-quarter 1987 orders elsewhere if no agreement is signed by mid-November.

Despite the hounds baying at his heels, Mr. Roderick coolly told reporters at a press conference last week: ``I assure you we will take the time necessary to do a thorough and prudent job in order to fulfill properly our obligations to our shareholders.''

Raider Icahn may have received moral support for his takeover attempt from USX's dismal third-quarter earnings statement. USX announced a quarterly net loss of $183 million on sales of $3.3 billion, down from a profit of $144 million on sales of $5.3 billion in the third quarter of '85.

Lower oil prices and the halt in steelmaking were the culprits, the chairman said. The loss bolsters Icahn's argument that companies like USX are laden with excess and incompetent managers and would fare better if slimmed down.

``I think there's tremendous value,'' Icahn said of USX in a magazine interview recently. ``Oil is pretty close to the lowest it's been. Steel is at the worst - that's when you want to buy things, when they're really at the worst level they've ever been, and nobody likes them. And to put it politely, management seems to have made a lot of errors and might not be the best.''

Roderick feels that Icahn ``obviously has no experience in the oil business, none in the steel business.'' A recent proposal from Icahn contained no clue to his restructuring plans, the embattled chairman said. What could Icahn - or USX, for that matter - do that the company has not yet done?

Restructuring has been a familiar term at USX, although until now it has led to growth, not decline. Marathon Oil was bought in 1982 and Texas Oil & Gas this year. But oil operations within USX posted a third-quarter operating loss of $4 million on more than $2 billion in sales. Nonetheless, oil remains the company's bright star.

``The big attraction of USX to outsiders are the oil reserves,'' says Howard Nichol, an analyst with the Advest Group, a brokerage based in Hartford, Conn. ``Icahn is less interested in steel without oil.''

How USX disposes of its oil holdings is the key to the future of the company, analysts say.

For the first time, Roderick last week detailed possible strategies. They run the gamut from a sale of assets to a leveraged buyout or an acquisition by Icahn, or else ``we could break up into more than two businesses, perhaps as many as three, four, or five,'' the chairman said.

The most likely alternative mentioned by the chairman is a master limited partnership for a portion of its oil holdings. USX would relinquish operating control of the oil unit to the partnership, which would have its own board of governors and management, according to Scott Jones, an energy economist with Chase Econometrics in Bala-Cynwyd, Pa.

``When they try to keep assets packaged together under one management, Wall Street undervalues oil,'' Mr. Jones says.

Untouched by a giant conglomerate, the oil unit would be viewed as steady cash cow. The steel operations, already in the throes of change, could be revamped.

``They could take a chapter from National Steel,'' says John Jacobson, a steel analyst who is also at Chase Econometrics.

National spun off one plant to employees to form Weirton Steel and sold half of the rest to Japanese steel producer Nippon Kokan.

The pressure on USX has been relieved slightly by the departure of two former acquisition specialists from the fray, T.Boone Pickens and Australian Robert Holmes a Court.

``I don't think this company is a shining star,'' Mr. Jacobson says. ``I don't think it's attracting a huge number of suitors.''

For its part, USX has commissioned a study of the company and has accumulated a war chest of close to $3 billion. Roderick does not appear overly concerned by the takeover attempts.

``We restructured into something, and I think it's interesting that people are fighting over us,'' he said. ``I get a certain pleasure from that.''