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FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report: April 7, 1998
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HOUSEHOLD INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
Delaware 1-8198 36-3121988
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(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification
incorporation Number)
2700 Sanders Road, Prospect Heights, Illinois 60070
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 847/564-5000
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Item 5. Other Events
Household International, Inc. ("Household") announced
on April 7, 1998 that it had reached a merger agreement
with Beneficial Corporation ("Beneficial"). A joint
press release of Household and Beneficial is filed as
an exhibit hereto.
Under the terms of the agreement, Beneficial
shareholders will receive 1.0222 shares of Household
common stock for each share of Beneficial common stock
in a fixed exchange ratio. Based on Household's
closing price on Monday, April 6, 1998, the transaction
is valued at $150 per Beneficial share or a total of
over $8.6 billion. The transaction is subject to
regulatory clearance and the approval of both
companies' shareholders. It is expected to be
completed in the third quarter of 1998.
Item 7. Financial Statements and Exhibits
(a) Financial statements of businesses acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable.
(c) Exhibits.
No. Exhibit
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99 Press release titled "Household
International and Beneficial Corporation to
Merge in $8.6 Billion Stock Transaction"
dated April 7, 1998
99.1 Materials Presented to Analysts on April 7,
1998
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SIGNATURE
Pursuant to the requirement 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.
HOUSEHOLD INTERNATIONAL, INC.
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(Registrant)
By: /s/ John W. Blenke
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John W. Blenke
Assistant Secretary
Dated: April 7, 1998
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U:\LAW\EDGAR\I8K4798.WP
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EXHIBIT INDEX
Exhibit No. Exhibit
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99 Press release titled "Household International and
Beneficial Corporation to Merge in $8.6 Billion
Stock Transaction" dated April 7, 1998
99.1 Materials Presented to Analysts on April 7, 1998
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For Immediate Release
Contacts: For Household For
Beneficial
Craig A. Streem John R.
Engelhardt
Vice President - Investor Relations Analysts
or
847.564.6053 Robert Wade,
or Denise Foy
Celeste M. Murphy Media
Director - Investor Relations 302.425.2500
847.564.7568
HOUSEHOLD INTERNATIONAL AND BENEFICIAL CORPORATION
TO MERGE IN $8.6 BILLION STOCK TRANSACTION
Combination Will Create One Of The Leading Consumer Finance
Companies In U.S.
PROSPECT HEIGHTS, IL, and WILMINGTON, DE, April 7, 1998 -
Household International (NYSE: HI) and Beneficial Corporation
(NYSE: BNL) today announced a definitive merger agreement that
will create one of the country's leading consumer finance and
credit card companies.
Under the terms of the agreement, which has been unanimously
approved by both companies' boards of directors, Beneficial
shareholders will receive 1.0222 shares of Household common stock
for each share of Beneficial common stock in a fixed exchange
ratio. Based on Household's closing price on Monday, April 6,
the transaction is valued at $150 per Beneficial share, or a
total of over $8.6 billion. The transaction will be accounted
for as a pooling of interests and is expected to be tax free to
Beneficial shareholders.
The companies will have combined pro forma 1997 managed revenues
of over $7 billion, a market capitalization of $24 billion,
managed receivables of $62 billion and over 30 million customer
accounts. The company will continue to be called Household
International.
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William F. Aldinger, Household's Chairman and Chief Executive
Officer, who will be Chief Executive Officer of the combined
company, said, "This is an outstanding and unique opportunity to
combine two leaders in consumer lending. Finn Caspersen and his
team have built a unique and highly valuable franchise at
Beneficial. Together, Household and Beneficial have the
financial strength, portfolio balance and expanded market
presence that will allow us to provide superior returns for
shareholders. Our employees and customers will also benefit from
the combination. We expect Beneficial's branch network and
strong brand name to benefit from our focus on technology and low
cost operations. Furthermore, our combined distribution
channels, complementary product capabilities, and thirty million
customer relationships should lead to higher receivables and
revenue growth."
Finn M.W. Caspersen, Chairman and Chief Executive Officer of
Beneficial, will be Chairman of the combined company. Mr.
Caspersen said, "In February, we announced that we would evaluate
the full range of alternatives to create significantly enhanced
value for Beneficial shareholders. This transaction delivers on
that promise and creates a world class consumer finance company.
We couldn't be more pleased with the result - the combination
with Household. Together, we will be among the leading providers
of consumer finance, private label and general purpose credit
cards. We expect this transaction to reward everyone involved as
it creates a stronger competitor with a highly promising future.
The management of Household has a proven track record of bringing
companies together, and we expect the integration to proceed
smoothly, with minimal disruptions for customers."
The companies expect the transaction to be accretive to
Household's earnings beginning in 1999, based on growth
opportunities and projected annual cost savings of approximately
$450 million, or approximately 42% of Beneficial's 1997 operating
expenses. The two companies have cost savings potential in their
U.S. branch networks, private label credit cards, and corporate
operations. To cover transaction costs, asset writedowns and
other related expenses, Household expects to record a one time
charge of approximately $1 billion at the closing of the
transaction.
The transaction is subject to regulatory clearance and other
customary conditions and the approval of both companies'
shareholders. It is expected to be completed in the third
quarter of 1998.
As a result of the merger, Household will have approximately 163
million outstanding common shares, before giving effect to its
previously announced three for one stock split effective for
shareholders of record on May 14, 1998. Approximately 67% of the
combined company shares will be owned by current Household
shareholders and 33% by current Beneficial shareholders. It is
anticipated that the Board of the combined entity will have 17
members including four previous Beneficial board members.
Household and Beneficial have granted each other cross options
for 19.9% of the common stock outstanding of the separate
entities.
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Beneficial Corporation is a New York Stock Exchange listed
financial services holding company. Subsidiaries of the company
provide financial services through their various consumer
finance, credit card, banking and insurance operations located in
the United States, the United Kingdom and Ireland.
Household International, through its subsidiaries, is a leading
provider of consumer finance and credit card products in the
United States, Canada and the United Kingdom. HFC, one of
Household's core businesses, is the oldest consumer finance
company in the United States. Additionally, Household is one of
the nation's leading issuers of private label and general purpose
credit cards. Its principal card products include the GM Card
and the AFL-CIO's Union Privilege card.
Goldman, Sachs & Co. and Merrill Lynch & Co. served as financial
advisors to Beneficial. Morgan Stanley Dean Witter & Co. served
as financial advisor to Household.
This press release contains certain estimates and projections
regarding each of Household International, Beneficial Corporation
and the combined company following the merger, including
estimates and projections related to cost savings, enhanced
revenues and accretion to illustrate earnings that may be
realized from the merger, and certain restructuring charges
expected to be incurred in connection with the merger. These
estimates and projections constitute forward-looking statements
(within the meaning of the Private Securities Litigation Reform
Act of 1995), which involve significant risks and certainties.
Actual results may differ materially from the results discussed
in these forward-looking statements. Factors that might cause
such a difference include, but are not limited to, risks and
uncertainties related to execution of the contemplated
transaction (including integration activities) and the factors
discussed in Household International's and Beneficial's current
Forms 10K as filed with the Securities and Exchange Commission,
to which reports reference is hereby made.
# # #
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Exhibit 99.1
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Materials Presented to
Analysts on April 7, 1998
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Household Beneficial
Corporation
Shareholder/Analyst Presentation
April 1998
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Cautionary Statement
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This presentation contains certain estimates and projections
regarding each of Household International, Beneficial Corporation
and the combined company following the merger, including
estimates and projections related to cost savings, enhanced
revenues and accretion to illustrate earnings that may be
realized from the merger, and certain restructuring charges
expected to be incurred in connection with the merger. These
estimates and projections constitute forward-looking statements
(within the meaning of the Private Securities Litigation Reform
Act of 1995), which involve significant risks and certainties.
Actual results may differ materially from the results discussed
in these forward-looking statements. Factors that might cause
such a difference include, but are not limited to, risks and
uncertainties related to execution of the contemplated
transaction (including integration activities) and the factors
discussed in Household International's and Beneficial's current
Forms 10K as filed with the Securities and Exchange Commission,
to which reports reference is hereby made.
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Overview of Transaction
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- -- Strategically Compelling
-- Creates one of the U.S.'s leading consumer lending
companies
-- Combines the two best known brand names in consumer
finance
-- Expands market presence and product offerings
-- Provides significant cost savings opportunities
-- Adds opportunity for future growth
-- Creates value for shareholders
- -- Financially Attractive
-- $.20 to $.30 accretive to 1999 EPS
-- Strengthens capital position
-- Provides balance to portfolio mix
-- Improves credit profile
- -- Proven management track record of successfully integrating
acquisitions and implementing cost savings
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Terms of Transaction
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Total Value (1) (2): $8.6 Billion
Implied Value per BNL
Share (1): $150.00
Fixed Exchange Ratio: 1.0222 Household share for each
Beneficial share
Structure: Pooling of interests
Multiples Paid: With Synergies Without Synergies
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-- 1999 P/E (3) 13.6X 24.9X
-- P/B 4.8 4.8
Expected Closing: Third Quarter 1998
Notes: (1) Based on closing prices as of April 6, 1998.
(2) Assumes 6.0MM options outstanding with an average
exercise price of $60.92
(3) Based on IBES estimates.
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Strengths of Combined Company
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- -- Combines complementary U.S. branch networks
- -- Leverages scale of combined brands
- -- Merges two large private label credit card issuers
- -- Leverages strong UK branch and credit card operations
- -- Utilizes "Best Practices" of centralized processing and
decentralized sales
- -- Expands product offerings and cross-sell opportunities
- -- Balances portfolio mix
- -- Broadens application of database marketing skills
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Beneficial is an Excellent Strategic Fit With Household
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Composition of Managed Receivables
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Beneficial Household
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Real Estate 49.7% Visa/MasterCard
40.3%
Private Label Credit Cards 26.8% Real Estate Secured
24.4%
Personal Unsecured 17.4% Personal Unsecured
20.2%
Other 6.1% Private Label Credit Cards
12.6%
Other
2.5%
Total $16,858MM Total $45,376MM
Pro Forma Composition on Managed Receivables (1)
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Real Estate Secured 31.2%
Visa/MasterCard 29.3%
Personal Unsecured 19.5%
Private Label Credit Cards 16.4%
Other 3.6%
Total $62,234MM
Total Customer Accounts (1)
Beneficial 7,100,000
Household 23,000,000
Pro Forma Comb. 30,100,000
Note: (1) Excluding the sale of Beneficial's Canadian and
German operations.
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Creates a Significantly Stronger Market Player
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Book Value (1)
Combined Company $6,314MM
Associates $6,269MM
Household $4,516MM
MBNA $1,764MM
Beneficial (5) $1,798MM
Norwest Finance (4) $1,358MM
American General (4) $1,323MM
AVCO $1,218MM
Capital One $ 893MM
Market Capitalization (2)
Associates (4) $28,759MM
Combined Company (3) $22,907MM
MBNA $18,791MM
American General $16,214MM
Household $15,952MM
Beneficial $ 6,955MM
Capital One $ 5,822MM
Total Managed Assets
Combined Company $71,340MM
Associates $60,100MM
MBNA $59,686MM
Household $51,868MM
Beneficial (4) $19,472MM
Capital One $16,631MM
Norwest Finance $ 9,187MM
AVCO $ 8,826MM
American General (4) $ 8,770MM
Last 12 Month Net Income
Associates $1,032MM
Combined Company $ 961MM
Household $ 687MM
MBNA $ 623MM
Norwest Finance (4) $ 279MM
Beneficial $ 274MM
AVCO $ 192MM
Capital One $ 169MM
American General (4) $ 42MM
Notes: (1) Financial data as of 12/31/97, unless otherwise noted.
(2) Market data as of 3/4/98.
(3) Calculated by adding Household and Beneficial.
Excludes
acquisition effects.
(4) Financial data as of 9/30/97.
(5) Excludes Canadian and German operations.
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Strategy for Combined Company Operations
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- -- U.S. branch network
-- Maintain Beneficial brand name on Beneficial branches
-- Evaluate branch overlap and consolidate where appropriate
-- Increase Beneficial branch sales by leveraging existing
Household
technology
-- Centralize collections and administrative functions
__ Accelerate productivity focus
- -- U.K. branches
-- Integrate with existing Household businesses and
technology
-- Realize efficiency gains
- -- Private Label credit card business
-- Combine businesses under Household/Beneficial brand
-- Integrate technology and back-offices
-- Realize efficiency gains
-- Improve lead management and cross-sell
- -- Merge corporate, administrative and systems areas with
Household to
improve efficiency
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Overview of Cost Savings and Revenue Enhancements
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Fully Phased-In Basis
Fully phased-in cost saves $450MM
-- % BNL expenses (1) 41.5%
-- % of combined BNL and HI expenses (1) 14.7%
BNL efficiency ratio
-- Before 52%
-- After - pro forma combined company Low 30%
Note: (1) Percentages based on 1997.
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Revenue Enhancements
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- -- Sources of additional revenue
-- Additional sales productivity
-- Offering Household's Personal Home Owner Loan products to
Beneficial customers
-- Selectively increase LTV on real estate secured
-- Additional fee income
-- Employ excess capital
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One-Time Costs
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($Millions)
Fixed Asset & Systems Write-Down $ 225
Peapack and Harbor Island 150
Severance and Retention 200
Securitization Reserve Adj. 150
Transaction Costs 100
Debt Retirement 75
Other 100
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$1,000
% of Run Rate Cost Savings 227%
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% of Run Rate Cost Savings
Without Peapack Facility,
Harbor Island and
Debt Refinancing 177%
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Pro Forma Financials
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Income Statement - Pooling Accounting
($ Millions)
1999
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Household IBES Net Income (1) $1,016
Beneficial IBES Net Income (2) 341
After Tax Synergies 270
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Adjusted Net Income $1,627
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Avg. Diluted Shares Outstanding 169.5
Pro Forma EPS $ 9.60
Household Standalone EPS $ 9.35
Accretion (Dilution) (3) $ 0.25
Notes: (1) Based on $9.35 1999 IBES estimate for Household.
(2) Based $6.03 1999 IBES estimate for Beneficial.
(3) Represents mid-point of expected accretion range of
$0.20 to $0.30.
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Household Financial Performance
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Earnings Per Share
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1993 - $2.86
1994 - $3.50
1995 - $4.31
1996 - $5.31
1997 - $6.50
CAGR: 22.9%
Efficiency Ratio
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1993 - 52%
1994 - 53%
1995 - 46%
1996 - 41%
1997 - 36%
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Record of Outstanding Performance
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Graph presenting the performance of Household Common Stock from
August 1, 1994 ($34.25 per share) to April 6, 1998 ($146.75 per
share).
Transaction Provides Opportunity for Continued Outperformance
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Summary
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- -- Compelling strategic fit
- -- Accretive beginning in 1999
- -- Opportunity for improved efficiency
- -- Platform for sustained future growth
- -- Attractive for investors
