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July 27, 1998 02:00 AM

TENNECO MAY SPLIT INTO 2 UNITS

Michael Lauzon
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    Tenneco Inc. might separate its plastics packaging and container-board businesses in a plan to enhance shareholder value, the Greenwich, Conn., firm announced July 21.

    Tenneco's management will consider selling the container-board business and will make a recommendation to the board of directors this fall. Spokeswoman Barb Posner said a potential sale of the specialty packaging business, mainly comprising plastics, also is one of many options.

    Analyst Douglas Groh said he would like to see Tenneco spin off its specialty packaging business as a separate company and he expects that eventually to happen. A separate specialty packaging business would be dedicated to areas where the greatest return on investment is, Groh said in an telephone interview from Merrill Lynch Capital Markets' office in New York.

    The business has ``lots of new products and good initiatives,'' Groh said. It would be easier to manage than a business that includes the wildly cyclical container-board business, he added.

    Tenneco Packaging's specialty business recorded sales of $731 million for the three months ended June 30, up more than 9 percent from $669 million a year ago. It makes a range of consumer film and bag products under Hefty and other trade names, expanded polystyrene foam containers and cushioned, protective packaging. Its aluminum foil business also is part of the specialty unit.

    The specialty business's growth was aided by new products, including the Hefty Slide Rite bag closure system, Medi-Zip medical bags, improved Hefty Handle Sak waste bags, and EPS foam packaging for McDonald's new Big Breakfast Deluxe.

    Posner said it is too early to know if a separate specialty packaging business would pursue acquisitions aggressively. It has a history of growing through acquisitions.

    Tenneco aims to reduce overall costs by $100 million a year and specialty packaging will be expected to do its share, according to Posner. She could not rule out any plant closings but she stressed Tenneco ``is not a slash-and-burn'' company.

    Tenneco is looking at separating its automotive and packaging businesses into stand-alone operations. It has spent the past five years streamlining in some areas and expanding through acquisition in others to increase its value to shareholders.

    Tenneco reported total sales of $2 billion for the second quarter and profit of $137 million.

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