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Household buys Beneficial
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April 7, 1998: 2:30 p.m. ET
Household swapping $8.6 billion of stock in battle with industry leader
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NEW YORK (CNNfn) - After nearly two months of talks, Household International Inc. has agreed to acquire Beneficial Corp. for $8.6 billion in stock.
The move strengthens Prospect Heights, Ill.-based Household, a consumer finance company, in its fight against market leader, Associates First Capital Corp. which was also believed to have been a possible suitor.
Under terms of the deal, Beneficial holders will get 1.0222 shares of Household stock for each Beneficial share. Based on Household's April 6 closing price, the transaction values Beneficial at $150, or about $8.6 billion.
The transaction will be entered as a pooling of interests and is expected to be tax-free to Beneficial shareholders.
Beneficial Chairman and Chief Executive Finn M.W. Caspersen outlined the board's intentions to sell the company in a letter to shareholders in mid-February when Beneficial hired Goldman Sachs and Merrill Lynch as financial advisors.
Beneficial, of Wilmington, Del., already has sold its Canadian subsidiary, Beneficial Canada Holdings Inc., to Associates First Capital Corp. The company also has agreed to sell real estate in New Jersey and Florida.
Household said it will take a one-time charge of $1 billion at the close of the transaction, which is expected by the third quarter.
The transaction is subject to regulatory clearance and other customary conditions and the approval of both companies' shareholders.
William F. Aldinger, Household's chairman and chief executive, will be chief executive of the combined company. Caspersen will serve as chairman.
The combined company will have pro-forma 1997 revenues of over $7 billion, a market capitalization of $24 billion, managed receivables of $62 billion and over 30 million customer accounts. By comparison, Dallas-based Associates First Capital had 1997 revenue of $8.2 billion.
The combined company expects the transaction to be added to Household's earnings beginning in 1999, based on growth opportunities and projected annual cost savings of about $450 million, or approximately 42 percent of Beneficial's 1997 operating expenses.
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