SECURITIES AND EXCHANGE COMMISSION Washington,
D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported)
JANUARY 24, 1997
HIGHLANDS INSURANCE GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or Other Jurisdiction of Incorporation)
1-14028 75-2370945
(Commission File Number) (IRS Employee Identification No.)
10370 Richmond Avenue,
Houston, Texas 77042-4123
(Address of principal executive offices)
(713)952-9555
Registrant's telephone number, including area code
ITEM 5. Other Events
The registrant, may at its option, report under this item
any events, with respect to which information is not otherwise
called for by this form, that the registrant deems of importance
to security holders.
(a) On January 24, 1997, the registrant, Highlands
Insurance Group, Inc. ("Highlands") issued a press release
entitled "Highlands Insurance Group, Inc. Reached Agreement on
Revised Terms to Acquire Vik Brothers Insurance, Inc." pertaining
to an agreement in principle reached on the revised terms of the
Agreement and Plan of Merger originally entered into June 21,
1996 for the acquisition by Highlands of Vik Brothers Insurance,
Inc. ("VBII").
Under the revised terms, Highlands will acquire VBII for
aggregate consideration of approximately $110 million (previously
$164 million), including the assumption of debt and preferred
stock. Contingent payments of up to $32 million based on VBII's
future operating results have been eliminated pursuant to the
revised terms.
Highlands will finance the acquisition with a combination of
preferred stock (or similar securities), common stock and bank
debt. Highlands will issue approximately 1.2 million shares of
common stock, representing approximately 9.4% of Highlands' then
outstanding common equity. Following completion of the
acquisition, Highlands intends to contribute up to a maximum of
$42 million of capital to the VBII insurance subsidiaries.
Consummation of the acquisition is subject to receipt of
certain consents, waivers or other agreements from certain
securityholders of VBII and other third parties who have existing
contractual arrangements with VBII, as well as regulatory
approval. The parties expect to sign an amendment to the
definitive agreement within the next several weeks incorporating
the revised terms of the acquisition, and to close the
acquisition by the end of the first quarter of 1997 or shortly
thereafter.
The foregoing summary, contained in paragraph (a) above, is
subject to the full text of the press release with respect
thereto, a copy of which is attached hereto as Exhibit 1, which
exhibit is incorporated herein by reference.
(b) Exhibits
Exhibit 1 - Press release dated January 24, 1997
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
HIGHLANDS INSURANCE GROUP, INC.
Date: January 30, 1997 By: MICHAEL A. WEBERPAL
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
1 Press Release of January 24, 1997
Incorporated by Reference
FOR IMMEDIATE RELEASE Contact: Charles J. Bachand
January 24, 1997 Vice President
(713) 267-8567 (713)267
8688 (Facsimile)
HIGHLANDS INSURANCE GROUP, INC.
REACHES AGREEMENT ON REVISED TERMS TO ACQUIRE
VIK BROTHERS INSURANCE, INC.
HOUSTON, Texas - January 24, 1997.Highlands Insurance Group,
Inc. (Highlands) (NYSE: HIC), a regional property and casualty
insurer, announced today that an agreement in principle has been
reached on the revised terms of the agreement originally entered
into June 21, 1996 for the acquisition by Highlands of Vik
Brothers Insurance, Inc. of Lawrenceville, NJ (VBII).
Under the revised terms, Highlands will acquire VBII for
aggregate consideration of approximately $110 million (previously
$164 million), including the assumption of debt and preferred
stock. Contingent payments of up to $32 million based on VBII's
future operating results have been eliminated pursuant to the
revised terms.
Highlands will finance the acquisition with a combination of
preferred stock (or similar securities), common stock and bank
debt. Highlands will issue approximately 1.2 million shares of
common stock, representing approximately 9.4% of Highlands' then
outstanding common equity. Following completion of the
acquisition, Highlands intends to contribute up to a maximum of
$42 million of capital to the VBII insurance subsidiaries.
Consummation of the acquisition is subject to receipt of
certain consents, waivers or other agreements from certain
securityholders of VBII and other third parties who have existing
contractual arrangements with VBII, as well as regulatory
approval. The parties expect to sign an amendment to the
definitive agreement within the next several weeks incorporating
the revised terms of the acquisition, and to close the
acquisition by the end of the first quarter of 1997 or shortly
thereafter.
The revised terms for the acquisition of VBII reflect a net
loss of $8.9 million for VBII for the nine months ended September
30, 1996. This net loss is primarily a result of significant
catastrophe losses in excess of $17 million incurred by VBII in
July and September. In addition, the revised terms reflect the
recent announcement by A.M. Best Company that its rating of VBII
was being reduced from "B+" (very good) to "B-" (adequate).
A.M. Best indicated that the rating will remain under review
pending the outcome of the transaction and the evaluation of
VBII's year-end financial condition and management's plans to
reverse deteriorating underwriting trends. However, A.M. Best
indicated they view the transaction favorably.
Upon the signing of the amendment, Highlands, rated "A-"
(excellent) by A.M. Best, will enter into an agreement with VBII
to reinsure all of VBII's new and renewal business written from
January 1, 1997 to the date the acquisition is completed. If the
acquisition is not completed, this reinsurance agreement will be
terminated.
VBII is an insurance holding company that primarily writes
commercial property and casualty business for small to medium
sized companies and, to a lesser extent, personal lines business.
The company is licensed in 44 states and operates through more
than 3,150 independent agents and twelve regional offices. For
the nine months ended September 30, 1996, VBII had net premiums
earned of $250.1 million and combined statutory surplus of
approximately $104 million.
Highlands is a regional insurance company that is primarily
engaged in the commercial property and casualty insurance
business, specializing in workers' compensation, general
liability and other related coverages.
