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): DECEMBER 17, 1997
ALLEGHANY CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
1-9371 51-0283071
(Commissioner File Number) (IRS Employer Identification Number)
375 PARK AVENUE
NEW YORK, NEW YORK 10152
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212)752-1356
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Item 5. Other Events.
On December 17, 1997, Alleghany Corporation issued the press release
attached hereto as Exhibit 99 and incorporated herein by reference.
Item 7. Financial Statements and Exhibits.
(c) EXHIBITS. The following exhibits accompany this Report:
EXHIBIT NUMBER EXHIBIT DESCRIPTION
99 Alleghany Corporation press release
dated December 17, 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.
ALLEGHANY CORPORATION
Date: December 17, 1997 By:/s/ David B. Cuming
David B. Cuming
Senior Vice President and chief
financial officer
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INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
99 Alleghany Corporation press release
dated December 17, 1997.
Contact: R.M. Hart
(212) 752-1356
FOR IMMEDIATE RELEASE
ALLEGHANY CORPORATION ANNOUNCES PLAN TO SPIN-OFF CHICAGO TITLE
NEW YORK, NY, December 17, 1997 -- Alleghany Corporation ("Alleghany") (NYSE: Y)
announced today that it intends to establish the title insurance and real estate
related services businesses conducted by its wholly owned subsidiary, Chicago
Title and Trust Company ("CT&T"), as an independent, publicly traded company
through a spin-off to Alleghany stockholders.
The spin-off will be effected through a pro rata distribution to
Alleghany's stockholders of shares of a newly formed holding company for CT&T.
The distribution is expected to be on a tax-free basis. The asset management
business conducted through CT&T's subsidiary, Alleghany Asset Management, Inc.
("AAM"), will not be part of the distribution and will remain with Alleghany.
On a pro forma basis, the title insurance and real estate related
services businesses which will be included in the new public company had pre-tax
earnings of $55.4 million on revenues of $1.0 billion for the first nine months
of 1997, compared with $66.3 million on revenues of $ 1.3 billion for the full
year 1996. For the year ended December 31, 1997, CT&T estimates that its
after-tax earnings, exclusive of the units that will be retained by Alleghany,
will be in excess of $50 million. CT&T is the nation's largest title insurance
underwriter, with offices and agencies throughout the country. It has
approximately 400 direct offices, over 7,800 employees, and relationships with
over 3,500 agencies. It insures over one million mortgages annually, including
new homes, existing homes, first and second mortgages, and many of the country's
commercial and industrial buildings.
The planned transaction is subject to market conditions, to receipt of
a favorable ruling from the Internal Revenue Service and to receipt of any
required regulatory approvals. The spin-off is expected to be in the late first
quarter or the second quarter of 1998. The new holding company will apply for
listing on the New York Stock Exchange.
John J. Burns, Jr., President and chief executive officer of Alleghany,
said: "The title insurance industry is undergoing a period of consolidation and
rapid change. Establishment of CT&T's title insurance business as an independent
company will enhance its ability to focus on operating efficiencies and
strategic initiatives required to respond to a changing marketplace. Moreover,
in the current competitive environment, it is more important than ever to foster
development of an entrepreneurial culture at CT&T. As an independent public
company, CT&T will be able to provide equity based compensation and incentives
that should be both attractive and appropriate for the retention and recruitment
of senior management and the motivation of employees throughout the
organization. After the distribution, CT&T will continue under its current
management with an independent board. John Rau, the current President and Chief
Executive Officer of CT&T, will continue in that role, reporting to the CT&T
Board. While the Board's final makeup is yet to be determined, we believe that
it will consist of many of the current CT&T directors, joined by some new
directors appropriate to its position as a major Chicago-headquartered company."
Rau, who joined CT&T as Chief Executive Officer in late 1996, had
previously served as CEO of Exchange National Bank, an independent public
company, from 1983 to 1989, and then as CEO of LaSalle National Bank after its
1989 merger with Exchange. Rau said, "this is the dawning of an exciting new era
for CT&T, the nation's oldest and finest real estate services firm. Alleghany
has supported CT&T throughout its tenure and invested heavily in our growth by
acquisition and development of industry leading systems. Alleghany has now
committed to provide a meaningful ownership interest to our managers and the
opportunity for all employees to become owners and participate directly in
future increases in shareholder value. This is both an act of high confidence in
our organization and insightful recognition of the best way to keep CT&T the
leader in its field."
Alleghany said that all final decisions about the awarding of equity,
and option opportunities for CT&T's employees would be disclosed in appropriate
public filings after requisite Board approval. Burns further commented, "it is
our preliminary intent, immediately upon the distribution, to grant stock and
option awards to employees in respect of about 7% of the new holding company
stock. As a current 100% shareholder, we believe that whatever initial dilution
results from distributing some of the equity to our exceptional employee group
will be recovered many times over by the effect of their having both an
ownership mindset and a real ownership stake."
CT&T, headquartered in Chicago, is engaged in the sale and underwriting
of title insurance and real estate related services (including credit, flood,
property evaluation, escrow and closing services). CT&T was acquired by
Alleghany in June 1985. With consolidated assets of approximately $4.9 billion
as of September 30, 1997, Alleghany is engaged, in addition to the title
insurance and real estate related services businesses conducted by CT&T, in the
reinsurance, industrial minerals and asset management businesses conducted by
its subsidiaries Underwriters Re Group, Inc., World Minerals Inc., and AAM
(which, as described above, is currently a subsidiary of CT&T but will remain
with Alleghany). Alleghany also operates a steel fastener importing business
through its Heads and Threads division.
# # #
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Year ended 1996 (unaudited, $ in millions)
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Historical Pro Forma
---------------------------- ------------------------
Alleghany
New (without New
CT Holding CT Holding
Alleghany CT&T Company Co. and
(including (including (CT&T including
CT&T AND AAM) AAM) AAM WITHOUT AAM) AAM)
Revenues $2,062.2 $1,381.0 $56.8 $1,324.2 $738.0
Total costs and expenses 1,935.1 1,301.6 43.7 1,257.9 677.2
Pre-tax earnings $127.1 $79.4 $13.1 $66.3 $60.8
Net income $87.0 $52.0 $7.8 $44.2 $42.8
Total book value $1,423.3 $360.6* $19.3 $341.3 $1,082.0
Nine months ended September 30, 1997 (unaudited, $ in millions)
---------------------------------------------------------------
Historical Pro Forma
---------------------------- ------------------------
Alleghany
New (without New
CT Holding CT Holding
Alleghany CT&T Company Co. and
(including (including (CT&T including
CT&T AND AAM) AAM) AAM WITHOUT AAM) AAM)
Revenues $1,629.2 $1,088.3 $57.2 $1,031.1 $598.1
Total costs and expenses 1,517.3 1,015.7 40.0 975.7 541.6
Pre-tax earnings $111.9 $72.6 $17.2 $55.4 $56.5
Net income $76.9 $47.9 $10.7 $37.2 $39.7
Total book value $1,539.7 $414.3* $22.2 $392.1 $1,147.6
* 1996 figure reflects the payment by CT&T of a $30.0 million cash dividend
to Alleghany in December 1996. A cash dividend is scheduled to be paid by
CT&T to Alleghany in December 1997 in the amount of $32.1 million.
Alleghany expects that the New CT Holding Company will pay cash dividends
to its stockholders consistent with CT&T's past practice.
Other information at 9/30/97:
CT&T full-time employees
(excluding AAM) 7,846
CT&T policy-issuing agents 3,886
CT&T full-servic offices 400
Assets under management
by AAM as of:
12/31/96 $14.5 billion
9/30/97 $21.3 billion
