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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):
June 26, 1994
CONSECO, INC.
State of Incorporation:
Indiana
Commission File IRS Employer Id.
No. 0-11164 No. 35-1468632
Address of Principal Executive Offices:
11825 North Pennsylvania Street
Carmel, Indiana 46032
Telephone No.
(317) 573-6100
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CONSECO, INC. AND SUBSIDIARIES
Item 5. Other Events.
Conseco, Inc., an Indiana corporation (the "Registrant"), KC Acquisition,
Inc., a Delaware corporation and a wholly owned subsidiary of the Registrant
("KC Acquisition"), and Kemper Corporation, a Delaware corporation ("Kemper"),
have entered into an Agreement and Plan of Merger dated as of June 26, 1994
(the "Merger Agreement"), pursuant to which KC Acquisition will be merged with
and into Kemper (the "Merger") in a transaction in which Kemper will be the
surviving corporation (the "Surviving Corporation"). As of the effective time
of the Merger (the "Effective Time"), the Surviving Corporation will be a
wholly owned subsidiary of the Registrant.
As of the Effective Time, by virtue of the Merger, each share of common
stock, par value $5.00 per share, of Kemper ("Common Stock") issued and
outstanding immediately prior to the Effective Time (other than shares of
Common Stock that are owned by Kemper or any subsidiary or by the Registrant
or any subsidiary (excluding shares in trust accounts, managed accounts,
custodial accounts and the like that are beneficially owned by third parties
as well as shares held in the ordinary course of business by subsidiaries of
Kemper or the Registrant that are insurance companies or broker-dealers) and
other than shares of Common Stock held by stockholders of Kemper who exercise
their appraisal rights) shall be converted into the right to receive (i) $56.00
per share, without interest, and (ii) the fraction (rounded to the nearest
ten-thousandth of a share) of a validly issued, fully paid and nonassessable
share of common stock, without par value, of the Registrant ("Conseco Common
Stock") determined by dividing $11.00 by the Average Parent Price (as defined
below). The "Average Parent Price" shall be equal to the average of the closing
prices of Conseco Common Stock on the New York Stock Exchange ("NYSE")
Composite Transactions Reporting System, as reported in The Wall Street
Journal, for the 20 trading days immediately preceding the second trading day
prior to the Effective Time (the "Trading Average"); provided, however, that
if the Trading Average is less than $45.50, then the Average Parent Price shall
be $45.50, and if the Trading Average is greater than $55.50, then the Average
Parent Price shall be $55.50.
Each share of (i) Series A Cumulative Convertible Preferred Stock of
Kemper, (ii) Series C Cumulative Preferred Stock of Kemper, (iii) Series D
Index Exchangeable Preferred Stock of Kemper and (iv) Series E Cumulative
Convertible Preferred Stock of Kemper issued and outstanding immediately prior
to the Effective Time (other than shares held by preferred stockholders of
Kemper who exercise their appraisal rights) will remain outstanding as one
validly issued, fully paid and nonassessable share of preferred stock of the
Surviving Corporation subsequent to the Effective Time, subject to the
respective terms and covenants thereof.
The closing of the Merger is subject to certain conditions set forth in
the Merger Agreement, including the approval of the Merger by the affirmative
vote of stockholders of Kemper entitled to cast at least a majority of the
votes which all stockholders of Kemper are entitled to cast thereon, the
approval of the issuance of shares of Conseco Common Stock in the Merger by the
affirmative vote of the holders of a majority of the shares present, or
represented, and entitled to vote thereon at a meeting of stockholders of the
Registrant, the receipt of all required governmental and regulatory consents,
the receipt of certain approvals with respect to the registered investment
companies for which Kemper or any subsidiary acts as investment adviser or
sub-adviser, the receipt of certain consents from the noninvestment company
advisory clients of the asset management subsidiaries of Kemper and the
obtaining by the Registrant of all financing necessary to pay the aggregate
cash consideration payable in connection with the Merger.
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CONSECO, INC. AND SUBSIDIARIES
Prior to the Effective Time, Conseco Capital Partners II, L.P. , an
affiliate of the Registrant ("CCP II"), will organize CCP II Holdings Corp.,
a Delaware corporation ("CCP II Holdings"), to acquire an existing life
insurance company ("Life Insurance Holdings") and to organize one or more real
estate acquisition subsidiaries. Simultaneously with or immediately following
the Effective Time, it is anticipated that the Surviving Corporation will sell
all of the issued and outstanding shares of capital stock of each of the
subsidiaries of Kemper engaged in the life insurance business and activities
related thereto to Life Insurance Holdings and certain subsidiaries of Kemper
engaged in holding interests in real estate businesses and activities related
thereto will be merged with and into one or more of the real estate acquisition
subsidiaries. In addition, it is anticipated that simultaneously with or
immediately following the Effective Time, Kemper Financial Services, Inc., a
Delaware corporation ("KFS"), will transfer all of the broker-dealer
businesses of KFS and all of the property and assets related thereto into a new
wholly owned subsidiary of KFS.
Pursuant to a letter dated as of June 21, 1994, Citibank, N.A., provided
the Registrant with financing commitments for senior secured debt facilities
of up to $1,223,500,000 required to consummate the Merger and related
transactions, consisting of secured term facilities of up to $723,500,000 to
the Surviving Corporation and a secured bridge facility of up to $100,000,000
to the Surviving Corporation and a secured term facility of up to $400,000,000
to CCP II Holdings.
Pursuant to a letter dated as of June 22, 1994, Morgan Stanley & Co.
Incorporated confirmed to the Registrant that it is highly confident that it
could arrange, as exclusive placement agent or lead managing underwriter, for
the sale of up to $350,000,000 of senior subordinated debentures to be issued
by the Surviving Corporation and up to $400,000,000 of senior subordinated
debentures to be issued by CCP II Holdings.
Pursuant to a letter dated as of June 23, 1994, CCP II confirmed to Kemper
that it is prepared to enter into an agreement to acquire from Kemper all of
the outstanding capital stock of Federal Kemper Life Assurance Company and
Kemper Investors Life Insurance Company, together with certain related real
estate businesses, for an aggregate purchase price of $1,350,000,000. CCP II
anticipates financing such acquisitions with the proceeds of the $400,000,000
secured term bank facility to CCP II Holdings referred to above, the
$400,000,000 of senior subordinated debentures to be issued by CCP II Holdings
referred to above, $250,000,000 of pay-in-kind preferred stock to be issued by
CCP II Holdings and $300,000,000 of equity to be contributed by the limited
partners of CCP II.
A copy of the joint press release of the Registrant and Kemper, dated June
27, 1994, relating to the above-described transactions is attached hereto as
Exhibit 99 and is incorporated herein by reference.
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CONSECO, INC. AND SUBSIDIARIES
Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits.
The following exhibit is filed with this report:
<TABLE>
<CAPTION>
Exhibit Number Description
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<S> <C>
99 Joint press release of the Registrant and Kemper
issued June 27, 1994, regarding the Merger Agreement.
</TABLE>
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CONSECO, INC. AND SUBSIDIARIES
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: July 1, 1994
CONSECO, INC.
By: LAWRENCE W. INLOW
------------------------
Lawrence W. Inlow
Executive Vice President
and General Counsel
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CONSECO, INC. AND SUBSIDIARIES
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<S> <C>
99 Joint press release of the Registrant and Kemper
issued June 27, 1994, regarding the Merger Agreement.
</TABLE>
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FOR IMMEDIATE RELEASE
CONSECO AND KEMPER SIGN DEFINITIVE MERGER AGREEMENT; CONSECO TO PURCHASE ALL
KEMPER SHARES FOR $67.00 IN CASH AND STOCK
Carmel, IN and Long Grove, IL: June 27, 1994 -- Conseco, Inc. (NYSE:CNC)
and Kemper Corporation (NYSE:KEM) today jointly announced that they have signed
a definitive merger agreement providing for all Kemper shareholders to receive
$67 in a combination of cash and stock for each of their shares. Under the
merger agreement, a wholly owned subsidiary of Conseco will be merged into
Kemper. It is contemplated that the combined entity would operate under the
Kemper name.
In the merger, each of the issued and outstanding shares of Kemper common
stock would be converted into the right to receive $56.00 in cash and a
fraction of a share of Conseco common stock determined by dividing $11.00 by
the average closing price of Conseco common stock prior to the merger (such
fraction to be not more than 0.2418 nor less than 0.1982).
Based on Conseco's closing price on Friday, June 24, 1994, the total
consideration would be $67.00 per Kemper share, and the total value of the
transaction would be approximately $3.25 billion, based on the number of fully
diluted Kemper shares and existing Kemper long-term debt and non-convertible
preferred stock.
"We are delighted that Kemper and Conseco are coming together to form one
of the leading financial services companies in the United States," said Stephen
C. Hilbert, founder and chairman of the board of Conseco. "We have a great
regard for Dave Mathis and his team and look forward to a smooth transition in
the combination of our two companies."
"We have great respect for Conseco and look forward to working with them,"
said David B. Mathis, chief executive officer of Kemper Corporation. "Our
board has unanimously concluded that this agreement is in the best interests
of our shareholders."
The merger agreement provides that, prior to July 6, 1994, under certain
circumstances, the board of directors of Kemper may terminate the agreement and
accept a proposal made by another party, upon payment to Conseco of $25 million
and reimbursement of its out-of-pocket expenses. Thereafter, if Kemper
receives a proposal from another party, Kemper may terminate the agreement upon
payment to Conseco of $100 million and reimbursement of its out-of-pocket
expenses.
(more)
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Conseco
2-2-2-2
Consummation of the merger is subject to customary terms and conditions,
including approval by the stockholders of Kemper and Conseco, regulatory
approvals and approvals by the boards and shareholders of Kemper's mutual
funds, and to obtaining the required financing.
At the closing, it is contemplated that Conseco Capital Partners II, L.P.
(CCP II), Conseco's life insurance acquisition vehicle, will purchase Kemper's
life insurance and real estate subsidiaries from Conseco.
Conseco and CCP II have obtained a commitment letter from Citibank N.A.
to provide in excess of $1.22 billion of senior secured bank financing for the
transaction. Morgan Stanley & Co. Incorporated has provided Conseco with a
letter stating that it is highly confident that up to $750 million of
subordinated debt financing will be available for the transaction. The
remaining cash required for the merger, approximately $550 million (including
estimated transaction, restructuring and other costs), is to be provided by
Conseco and other existing investors in CCP II.
Upon completion of the transaction, Conseco and its CCP II affiliate would
have more than $85 billion in assets under management, total net revenues and
annual collected premiums of $4.2 billion, and 9,000 employees; they would
provide a broad range of financial services to individual and institutional
customers.
Kemper, headquartered in Long Grove, Illinois, is a financial services
holding company with principal operations in asset management, life insurance
and securities brokerage. Kemper has approximately $90 billion in life
insurance in force and operates one of the 10 largest full-service brokerage
firms in the United States. Kemper has the nation's seventh-largest mutual
fund family, with $45 billion in assets under management, and also manages $22
billion in assets for Kemper's life insurance companies and other institutional
customers.
Conseco, which began operations in 1982, generates earnings from three
primary activities: operating life insurance companies; providing fee-based
services to affiliates and other financial institutions; and acquiring and
restructuring life insurance companies through specially formed acquisition
vehicles.
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Press & Analyst Contacts:
For Conseco, Inc.
James W. Rosensteele, Vice President-Investor Relations,
Conseco, Inc., (317) 573-2893
Joele Frank or Ann Hance, Abernathy/MacGregor/Scanlon, (212) 371-5999
For Kemper Corporation:
Steve Radis, Kemper Corporation, (708) 320-5552
Elliot Schrage or Davis Weinstock, Clark & Weinstock, (212) 953-2550
