Teledyne: stock as currency, then buybacks

What is Teledyne and why does it matter to a small holding company?

The Teledyne in this case is the original Teledyne, Inc., not today's listed company of the same name. Teledyne Technologies became an independent public company on November 29, 1999, after a spin-off from Allegheny Teledyne, which had been formed in 1996 when Teledyne and Allegheny Ludlum combined. Singleton ran the original company, and the 1999 filing is the primary source for its early history.

It matters because Singleton used the same stock two ways. Fortune reported that he used the stock as currency when Teledyne was a 1960s high-flier, and that from 1972 the company spent cash to retire it. A small holding company that plans to issue shares to sellers faces the same question: when is your own stock a good thing to spend, and when is it a good thing to buy?

What did it do, by the numbers?

• 1960. Singleton founded the original Teledyne. The 1999 registration statement says it acquired over 100 high-technology and specialty-metals businesses over the next two decades.
• 1972 to 1984. Fortune (April 29, 1985 issue, republished online in 2012) reported repurchases of about 85% of the company's shares for about $2.7 billion. The first repurchase in 1972 was at $8 a share and the last, in May 1984, at $200, both adjusted for splits and stock dividends. Fortune said the shares then rose to $300.
• Tender offers. Novel Investor reports eight tender offers for common shares, and one for preferred shares, between 1972 and 1984. I have not matched that count to a primary filing.
• 1988 to 1993. Teledyne's 1993 Form 10-K shows a 1988 board authorization to buy up to 5,000,000 shares, with 1,432,000 bought by December 31, 1993. It reported 55,439,048 shares outstanding on January 13, 1994, a cash dividend of $0.80 a share in each of 1991, 1992 and 1993, and sales of $2,491.7 million in 1993 against $3,206.8 million in 1991.
• 1993 result. A net loss of $116.5 million, which includes a $185.6 million cumulative effect of accounting changes, mainly for retiree benefits. Income before that and an extraordinary loss was $72.8 million.

What worked, or what went wrong?

The sources support these statements:

• The acquisition phase and the buyback phase both happened. The company issued shares to buy businesses, then reduced its share count by about 85%.
• Fortune called Teledyne the most celebrated buyback company and reported a shareholder gain of more than 3,000% since the buybacks began in 1972. The article quoted Warren Buffett on repurchases generally, not on Teledyne.
• By the early 1990s the company was paying a regular dividend and had a much smaller buyback program than in the 1970s and 1980s. The 1993 filing shows 1,432,000 shares bought over five years.
• The 1993 filing reports a net loss and falling sales. It does not link those to the earlier buybacks, and I do not either.

I have not found a primary source that gives a year-by-year share count or a count of acquisitions by year. Figures about the 1960s stock price and earnings multiples circulate in books and blogs, and I leave them out because I could not match them to a filing.

What does and does not transfer to a small holding company?

My view is that two things transfer:

• Treat your stock as a currency with a price. Spend it when the market pays you well for it. When it is cheap, a buyback may be the better use of cash. See when your stock is cheap currency.
• Decide in advance what would make you stop issuing shares and start buying them back.

Three things do not:

• A tender offer on a deeply liquid exchange listing. A thinly traded small-cap or OTC stock cannot support a repurchase at that scale.
• The size of the cash flow behind the buybacks. About $2.7 billion was spent in 12 years.
• The era. Today's securities rules, disclosure and accounting differ from those of the 1960s and 1970s.

Modern Teledyne Technologies, a different company, still mixes the two currencies. When it bought FLIR on May 14, 2021, each FLIR share received $28.00 in cash plus 0.0718 Teledyne shares, for a total transaction value of about $8.2 billion including net debt, according to its release.

What do the numbers show when you work them through?

• Price paid: $8 in 1972 to $200 in 1984 is 25 times, on Fortune's split-adjusted figures. A company that retires shares at rising prices needs rising earnings to justify them.
• FLIR mix (my calculation): the release gives about $57.40 per FLIR share on May 13, 2021. Less the $28.00 cash is $29.40 of stock, so about 48.8% of the value was cash and 51.2% stock.
• Implied Teledyne price (my calculation): $29.40 divided by 0.0718 is about $409 per share.
• 1993 sales (from the Form 10-K): $2,491.7 million against $3,206.8 million in 1991 is a decline of 22.3%.

Where these numbers come from: Early history is from the Teledyne Technologies Form 10 registration statement (1999). Repurchase totals and prices are from Fortune, "Beating the market by buying back stock". The tender-offer count is reported by Novel Investor. The 1988 authorization, 1993 results, dividends and share count are from Teledyne Inc. Form 10-K for 1993. The FLIR terms are from Teledyne's May 14, 2021 release (SEC Form 8-K exhibit). The 1999 independence date is from the Teledyne Technologies 10-K for fiscal 2025.

Related questions

Is today's Teledyne the same company?

No. The original Teledyne, Inc. combined with Allegheny Ludlum in 1996. Teledyne Technologies was spun off and became independent on November 29, 1999.

Did Singleton buy back stock the whole time?

No. Fortune dates the first repurchase to 1972. The 1999 filing places the acquisitions in the two decades after 1960, so the periods overlap in the 1970s. Neither source gives a year-by-year split.

Can a small holding company run buybacks like this?

Seldom at scale. Liquidity, cash flow and securities rules differ. See whether a holding company should pay dividends, buy back stock or acquire.

What comes next

To decide whether your own shares are worth spending, read how to value your stock as acquisition currency.

Related articles

• How do you value your own stock when using it to buy a company?
• What share price or P/E makes stock a sensible currency?
• Why did Constellation Software almost never issue shares, and Teledyne issue many?
• When does paying with stock beat paying with cash?
• Should a holdco pay a dividend, buy back stock or keep acquiring?

Meraki Dealmakers is a service of Meraki Partners, LLC, an advisory firm. It is not a broker-dealer, investment adviser, business broker, law firm or accounting firm. This article is general information, not legal, tax or investment advice.