SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Commission File Number 0-3578
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: August 8, 1995
Piedmont Management Company Inc.
(Exact name of registrant as specified in its charter)
Delaware 13-2612123
(State or other jurisdiction of corporation (IRS Employer
or organization) (Identification Number)
80 Maiden Lane, New York, N.Y.
10038
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: (212) 363-4650
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Item 5. Other Events
The Registrant has released the following information today:
"New York, New York, August 8, 1995 -- Piedmont Management Company
Inc. (Piedmont) (NASDAQ-NMS-"PMAN") and Chartwell Re Corporation
(Chartwell) announced today that they have entered into a definitive
agreement to merge. As a result of the merger, Piedmont's principal
insurance subsidiary, The Reinsurance Corporation of New York (RECO),
will become a subsidiary of Chartwell Reinsurance Company, the
reinsurance underwriting subsidiary of Chartwell.
In the transaction, holders of common and preferred stock of Piedmont
will receive newly-issued shares of common stock of Chartwell
representing approximately 45.25% of the outstanding stock of the
combined entity. Holders of common stock of Chartwell will retain
common stock of Chartwell representing 54.75% of the outstanding stock
of the combined entity. Chartwell intends to seek a stock exchange listing
of its common stock effective upon the closing of the merger.
Prior to the merger, Piedmont's asset management subsidiary, Lexington
Management Corporation (combined with Piedmont's other asset
management operations) will be spun-off to Piedmont's stockholders in a
tax-free transaction. Lexington manages approximately $3.4 billion in
assets, including $1.5 billion in a diversified group of mutual funds. Also
prior to the merger, Piedmont stockholders will receive a dividend of
contingent interest notes of Piedmont. The notes, which will mature on
June 30, 2006 unless previously redeemed, will provide for payment of up
to $57 million to holders at maturity, depending on the results, particularly
loss reserve development, over time of RECO's previously written
business included in the merger.
The merged entity will continue to be known as Chartwell Re Corp. and
will be managed by Chartwell's current management team. Four
members of Piedmont's existing Board of Directors will become directors
of Chartwell upon the merger. Upon closing, Chartwell Reinsurance
Company is expected to have a policyholders surplus of approximately
$180 million, total GAAP capitalization of approximately $225 million and
assets of approximately $1 billion. As part of the merger agreement,
Piedmont would increase RECO's reserves for losses incurred but not
reported in respect of its existing business by $25 million prior to
closing.
Commenting on the proposed merger, Chartwell's Chairman and Chief
Executive Officer, Richard E. Cole said, "This is a very positive
development for Chartwell. It will increase our surplus substantially,
diversify our book of business, and give us an attractive book of primary
program business. It will also provide us with the benefits of having a
public market for our common stock, which include access to public
capital and a currency to enhance our acquisition strategy. Also, the
contingent interest notes and reserve addition to be made by Piedmont
provide us with additional protection against any adverse
development which might occur in Piedmont's insurance business. The
economies of scale are also favorable. We are looking forward to
capitalizing on new opportunities and to expanding Chartwell's presence
in a rapidly consolidating industry."
Chartwell's President, Steven J. Bensinger, stated that "This merger is the
first step in the realization of Chartwell's strategy of growth and
acquisition. We will continue to explore additional opportunities and to
actively seek advantageous business combinations."
Piedmont's President and Chief Executive Officer, Robert M. DeMichele,
stated that "The merger with Chartwell will enable Piedmont's current
stockholders to capture the inherent value that has been built in its
reinsurance and insurance operations as part of a much larger publicly
traded entity, Chartwell, while the spinoff of Lexington and Piedmont's
other asset management companies will provide stockholders with an
interest in a publicly traded investment advisory and mutual fund
company. Our goal has been to unlock the intrinsic value that we have
been building for Piedmont's stockholders that, in our opinion, has not
been recognized in the market price of Piedmont's stock. We believe this
transaction not only accomplishes that objective but offers considerable
opportunity to participate in the growth of two publicly traded companies."
Following the merger, Chartwell plans to organize its business into direct
and reinsurance operations. Primary insurance will continue to be written
by RECO, which will focus on select program business. All reinsurance
will be written by Chartwell Reinsurance Company.
The transaction is subject to stockholder, bondholder, bank and
regulatory approval and certain other conditions and is expected to close
in the fourth quarter of 1995."
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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.
PIEDMONT MANAGEMENT COMPANY INC.
(Registrant)
By /S/ PETER J. PALENZONA
Peter J. Palenzona, Senior Vice President
Finance and Administration
(Chief Financial Officer)
Date: August 8, 1995
