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): February 5, 1997
MORGAN STANLEY GROUP INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1-9085 13-2838811
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification
incorporation) Number)
1585 Broadway, New York, New York 10036
(Address of principal executive offices including zip code)
Registrant's telephone number, including area code: (212) 761-4000
<PAGE>
Item 5. Other Events
Attached and incorporated herein by reference as Exhibit 99.1
and Exhibit 99.2, respectively, are copies of (1) a press release of Morgan
Stanley Group Inc. and Dean Witter, Discover & Co. announcing the signing of a
definitive agreement to merge the two companies and (2) a presentation regarding
the proposed merger made at a press conference on February 5, 1997.
Item 7(c). Exhibits
99.1. Press release dated February 5, 1997 announcing the signing of an
agreement to merge Morgan Stanley Group Inc. and Dean Witter, Discover
& Co.
99.2. Presentation presented regarding the proposed merger made at a press
conference on February 5, 1997
2
<PAGE>
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.
MORGAN STANLEY GROUP INC.
Registrant
Date: February 5, 1997 /s/ Patricia A. Kurtz
---------------------
Patricia A. Kurtz
Assistant Secretary
3
<PAGE>
Index to Exhibits
Exhibit No. Description
99.1. Press release dated February 5, 1997 announcing the signing of an
agreement to merge Morgan Stanley Group Inc. and Dean Witter,
Discover & Co.
99.2. Presentation presented regarding the proposed merger made at a
press conference on February 5, 1997
4
FOR IMMEDIATE RELEASE
<TABLE>
<S> <C> <C>
Contacts:
Jeanmarie McFadden Tim Lee Paul Verbinnen/George Sard
Morgan Stanley & Co. Dean Witter, Discover & Co. Sard Verbinnen & Co.
212/761-4059 212/392-8709 212/687-8080
</TABLE>
MORGAN STANLEY AND DEAN WITTER, DISCOVER IN MERGER OF EQUALS;
CREATES PREEMINENT GLOBAL FINANCIAL SERVICES FIRM
New Company To Focus on Market Leadership
In Securities, Asset Management and Credit Services
---------------------------------------------------
New York, February 5, 1997 -- Dean Witter, Discover & Co. (NYSE: DWD)
and Morgan Stanley Group Inc. (NYSE: MS) today announced a definitive agreement
to merge, creating a preeminent global financial services firm with a market
capitalization of $21 billion and leading market positions in its three primary
businesses - securities, asset management and credit services. The new company
will be named Morgan Stanley, Dean Witter, Discover & Co.
Under the terms of the definitive agreement unanimously approved
yesterday by the Boards of both companies, each Morgan Stanley common share will
be exchanged for 1.65 Dean Witter common shares.
Phillip J. Purcell, Chairman and Chief Executive Officer of Dean
Witter, will be Chairman and Chief Executive Officer of the new company. John J.
Mack, President of Morgan Stanley, will be President and Chief Operating Officer
of the new company. Richard B. Fisher, Chairman of Morgan Stanley, will be
Chairman of the Executive Committee of the Board of Directors. The Board will
have 14 members, with seven nominated by each firm.
"The combination of Morgan Stanley and Dean Witter, Discover may be as
close to an ideal merger as there is," said Mr. Purcell. "It is based on
powerful franchises, high profitability and opportunities for accelerated
growth. In the securities business, it combines Morgan Stanley's strengths in
investment banking and institutional sales and trading with
<PAGE>
2
Dean Witter's in retail distribution and asset gathering. In asset management,
the combination results in a business that manages more than $270 billion - the
largest of any securities firm. In credit services, the combined companies'
financial resources and the Morgan Stanley global presence create significant
opportunities for expansion of this business."
Mr. Purcell continued: "Morgan Stanley, Dean Witter, Discover will be a
global financial services powerhouse with unmatched origination and distribution
skills, and a unique balance between institutional and retail capabilities."
Said Mr. Mack, "The financial services industry is entering an era of
unprecedented convergence and consolidation. Those firms that want to control
their own destinies in the next century may have leading market positions in all
of their businesses, balanced earnings streams, broad-based customer access, and
a global presence among both providers and users of capital. This bold move will
accelerate the ability of both companies to achieve our respective long-term
strategic goals. With little overlap between the two firms, there will be
extraordinary new opportunities for our employees and customers as we create a
uniquely integrated company."
Said Mr. Fisher, "Phil Purcell and John Mack will lead a strong
management team, and it's clear that there is an excellent strategic fit between
two complementary and compatible firms with superb franchises and respected
brand names. This combination offers compelling benefits to the shareholders,
customers and employees of both companies, and will enable both firms to do far
more together than either could have done separately. This combination ensures
that the new firm will play a preeminent role as one of the handful of firms
dominating global financial services in the 21st century."
In the new company, Dean Witter's retail asset management and credit
services will report to Mr. Purcell. Institutional and retail securities,
investment banking and Morgan Stanley's asset management division will report to
Mr. Mack.
The transaction, which is expected to be completed in mid-1997, is
intended to be accounted for as a pooling of interests and is expected to be
tax-free. The merger is expected to be accretive to earnings per share for the
merged company. In connection with
<PAGE>
3
the transaction, each company granted the other an option, exercisable under
certain conditions, to acquire shares representing 19.9% of its outstanding
shares.
Morgan Stanley shareholders will have approximately 45% and Dean
Witter's shareholders will have approximately 55% of the new company's shares.
Pursuant to the pooling of interests method of accounting, at the time
of closing the combined company will formally rescind any open stock repurchase
authorizations existing at the time. Prior to closing, both companies may
continue to repurchase stock in the open market subject to the aggregate
limitations imposed by the pooling of interests method.
The merger is subject to customary closing conditions, including
certain regulatory approvals and the approval of shareholders of both companies.
Dean Witter, Discover & Co. is a financial services company with three
major businesses: full service brokerage, asset management and credit services.
It has the third largest retail brokerage firm with over 9,000 account
executives and 361 branches throughout the U.S. The company manages more than
$100 billion in customer assets. Led by its flagship Discover Card, Dean Witter
is the nation's largest credit card issuer with 39 million accounts, and the
third largest in receivables.
Since its formation in 1935, Morgan Stanley & Co. has been a leader in
the investment banking field. Through a network of 27 principal offices in 19
countries, Morgan Stanley offers a complete range of sophisticated financial
services to sovereign governments, corporations, institutions and individuals
throughout the world. In 1996, Morgan Stanley ranked first in the world in
mergers and acquisition advisory assignments and held a leading position in debt
and equity underwriting.
# # #
Morgan Stanley, Dean Witter, Discover & Co.
Preeminence in Global Financial Services
February 5, 1997
<PAGE>
Our Vision
TO CREATE THE PREEMINENT GLOBAL FINANCIAL SERVICES FIRM
Accelerated Growth
Highly Profitable
Highest Quality
1
<PAGE>
Creating the Preeminent Global Financial Services Firm
Engines: Powerful Franchises
Leading Global Securities Firm
Leading Global Asset Manager
Leading Global Credit Card Company
2
<PAGE>
Creating the Preeminent Global Financial Services Firm
VALUE DRIVERS
Preeminent Brands
Quality Professionals
Proprietary Distribution
Multiple Channels
Broad Customer Relationships
Global Platform
Size and Scale
3
<PAGE>
Powerful Franchises
Three Powerful Brand Names and Franchises
Premier Global Investment Bank
Leading Domestic Retail Securities Firm
Two Substantial Asset Management Businesses
Leading Credit Card Company
4
<PAGE>
Complementary Origination and Distribution
Supply Morgan Stanley Product Through
Dean Witter Distribution
Top Ranked Research
Underwritten Equity and Fixed Income
Global Products
Enhanced Retail Distribution Strength
Increased AE Productivity
Enhanced Ability to Attract and Retain AEs
Accelerated AE Growth
Expands Origination Capability
Increased Lead Managed Underwritings
Enhanced Corporate Relationships
5
<PAGE>
Powerful Asset Management Platform
Top 5 Globally in Total Assets
$271 BN in AUM
Multiple Channels and Brands
InterCapital
Morgan Stanley
Van Kampen American Capital
Balanced Product Mix
Poised to Grow in Changing Market Environments
Leverage Strengths Across Brands
Investment Performance
International Products
Positioned to Expand Globally
Europe
Emerging Markets
6
<PAGE>
Creating the Preeminent Global Financial Services Firm
Broad Customer Relationships
Major Corporations / Institutions Globally
3.2mm Retail Securities Customers
7mm Mutual Fund Share Owners
39mm Cardholders
20,000 Internet Brokerage Accounts (Lombard)
Balanced Earnings Stream
Securities
Asset Management
Cards
Size and Scope
Scale in Scale Businesses
Enhanced Capacity for Investment
Opportunities for Future Consolidation
7
<PAGE>
Transaction Summary
Terms: 1.65 Shares of Dean Witter, Discover & Co.
for each Morgan Stanley Share
Due Diligence Completed
Definitive Agreement Signed
Cross Options Granted
Structure: Pooling: Tax-Free Exchange
Approvals: Shareholder Votes and Regulatory Approvals
Timing: Mid - 1997
8
<PAGE>
The Combined Company
Name: Morgan Stanley, Dean Witter, Discover & Co.
Management: Chairman & CEO - Philip J. Purcell
President & COO - John J. Mack
Board: Chairman of Executive Committee - Richard B. Fisher
7 From Dean Witter, Discover & Co. /
7 From Morgan Stanley
(including 2 insiders from each)
Dividend: Dean Witter, Discover & Co. Dividend
Currently $0.56 Annually
9
<PAGE>
Financial Strength
Size and Scope: $21Bn in Market Capitalization
$11Bn in Common Equity
$12Bn Net Revenues
$3Bn Pre-tax Income
10
<PAGE>
Leading Franchises in Attractive Businesses
Securities/ #1 Global M&A
Investment Banking:
#1 IPOs(1)
#1 U.S. Equity(1)
#2 in Equity Research
#3 in Retail Account Executives
9,300
409 Offices Worldwide
21 Countries
3.2mm Retail Customers
Note: (1) Full credit to each manager. Source: Securities Data Company.
11
<PAGE>
Leading Franchises in Attractive Businesses
Asset Management: Top 5 Globally in Asset Management ($271Bn)
#5 in Mutual Funds ($146Bn)
7mm Shareholders
Credit Cards: #1 in Credit Cards (39mm)
#3 in Managed Loans ($37Bn)
#2 in Charge Volume ($54Bn)
Proprietary Merchant Network
12
<PAGE>
Growth Businesses
Industry Growth Rates
<TABLE>
<CAPTION>
10 Year 1 Year
------- ------
INVESTMENT BANKING AND SECURITIES
<S> <C> <C>
NYSE Trading Volume 10.8% 19.9%
Global Equity Underwriting(1) 19.0 40.5
Global M&A(1) 8.7 16.5
ASSET MANAGEMENT
Mutual Funds(2) 18.9 22.5
CREDIT CARDS
Card Receivables(3) 18.0 27.2
Notes: (1) Source: Securities Data Company.
(2) Source: Strategic Insight.
(3) Source: The Nilson Report.
</TABLE>
13
<PAGE>
Size and Scale
($Billions)
(The following data is represented by two bar charts in the original document.)
Common Equity(1)
<TABLE>
<S> <C>
PRO FORMA $10.6
Merrill Lynch(2) $ 6.0
Morgan Stanley $ 5.4
Dean Witter $ 5.2
Smith Barney $ 2.8
PaineWebber $ 1.5
Profit Before Taxes(1)
PRO FORMA $ 3.1
Merrill Lynch $ 2.6
Morgan Stanley $ 1.6
Dean Witter $ 1.5
Smith Barney $ 1.4
PaineWebber $ 0.6
- --------
Notes: (1) At or for the latest fiscal year end.
(2) As of 9/30/96.
</TABLE>
14
<PAGE>
Size and Scale
($Billions)
(The following data is represented by a bar chart in the original document.)
<TABLE>
Market Capitalization(1)
<S> <C>
Citicorp $56
Chase $41
Travelers $35
American Express $29
PRO FORMA $21
J.P. Morgan $19
Merrill Lynch $14
Fidelity Estimate
Goldman Sachs Estimate
Bankers Trust $ 7
PaineWebber $ 3
- --------
Note: (1) As of February 3, 1997.
</TABLE>
15
<PAGE>
Market Valuation
(The following data is represented by a bar chart in the original document.)
<TABLE>
Price/Earnings Ratios(1)
<S> <C>
American Express 15.2x
Travelers 14.9x
Citicorp 14.0x
J.P. Morgan 13.1x
Merrill Lynch 12.2x
Dean Witter 12.0x
Bankers Trust 11.5x
Chase 11.1x
Morgan Stanley 10.8x
- --------
Note: (1) Market information as of 02/03/97. Based on IBES estimates as of
01/16/97.
</TABLE>
16
<PAGE>
Securities/Investment Banking
<PAGE>
Leading Strategic Advisor
Global M&A
Announced Transactions
<TABLE>
<CAPTION>
Total Value
1996
<C> <C>
1. Morgan Stanley $238Bn
2. Merrill Lynch 204
3. Goldman, Sachs 166
4. Lazard Houses 131
5. J.P. Morgan 121
Source: Securities Data Company.
</TABLE>
17
<PAGE>
Top-Ranked Equity Research: Global
(The following data is represented by a stacked bar chart in the original
document.)
<TABLE>
<CAPTION>
Analyst Rankings(1)
-------------------------------------
# of 1st 2nd 3rd Runner
Analysts Team Team Team Up
<S> <C> <C> <C> <C> <C>
Merrill Lynch 90 26 28 16 20
MORGAN STANLEY 74 23 11 20 20
Goldman Sachs 57 14 14 12 17
Smith Barney 23 7 6 5 5
PaineWebber 19 4 3 3 9
Note: (1) Source: Institutional Investor. Includes North America, Non-Japan
Asia, Europe and Latin America equity research analysis.
</TABLE>
18
<PAGE>
Distribution Strength: Retail
(The following data is represented by two bar charts in the original document.)
<TABLE>
Account Executives (000's)
<S> <C>
Merrill Lynch 14.3
Smith Barney 10.4
Dean Witter 9.1
PaineWebber 6.1
A.G. Edwards 5.5
Net Change in Account Executives
(1991 - Sept. 1996)
Dean Witter 2,251
Merrill Lynch 2,200
A.G. Edwards 1,396
PaineWebber (-284)
Smith Barney (-1,552)
</TABLE>
19
<PAGE>
Distribution Strength: Equity
Independent Survey: Top 100 Institutions(1)
Equity Underwriting Franchise
1. Morgan Stanley
2. Goldman Sachs
3. Alex Brown
4. DLJ
5. Merrill Lynch
Sales Penetration
1. Morgan Stanley
2. DLJ
3. Smith Barney
4. Merrill Lynch
5. Goldman Sachs
Research Franchise
1. Morgan Stanley
2. Goldman Sachs
3. Merrill Lynch
4. DLJ
5. Cowen
Trading Acumen
1. Morgan Stanley
2. Lehman Brothers
3. Smith Barney
4. Salomon Brothers
5. DLJ
Note: (1) Based on independent annual survey of managers at top
100 institutions.
20
<PAGE>
(The following information is represented as a map graphic in the original
document.)
Distribution Strength: Domestic
Dean Witter Offices
361 Branches
21
<PAGE>
(The following information is represented as a map graphic in the original
document.)
Distribution Strength: Global
Morgan Stanley Offices
38 Offices in 21 Countries
22
<PAGE>
Leading Originator - Global Equity
<TABLE>
Worldwide Common Stock Underwriting(1)
<CAPTION>
Total
Proceeds
1996
<C> <C>
1 Merrill Lynch $54 Bn
Pro Forma 53
2 Goldman Sachs 48
3 Morgan Stanley 44
4 CS First Boston 36
5 Smith Barney 34
Note: (1) Full credit to each manager. Source: Securities Data Company.
</TABLE>
23
<PAGE>
Asset Management
<PAGE>
Asset Management Industry
Sizable Market
$10 Trillion(1)
High Growth
High Margin
Attractive ROE
Significant Barriers to Entry
Brand Name
Investment Performance
Marketing
Distribution
Technology
Scale
Note: (1) Source: Intersec.
24
<PAGE>
Assets Under Management
($ Billions)(1)
(The following data is represented by a bar chart in the original document.)
<TABLE>
<S> <C>
Fidelity $496
PRO FORMA $271
Vanguard $250
Merrill Lynch $234
Franklin/Templeton $181
Travelers $112
Note: (1) Financial information as of 12/31/96. Based on public information, if
available, or company estimates.
</TABLE>
25
<PAGE>
Leading Asset Manager
Mutual Funds
($ Billions)
<TABLE>
ALL MUTUAL FUNDS
(Excl. Money Markets)
<C> <C>
1 Fidelity $329
2 Vanguard 194
3 American Funds 170
4 Franklin/Templeton 137
PRO FORMA 119
5 Putnam 115
EQUITY FUNDS
1 Fidelity $297
2 American Funds 156
3 Vanguard 144
4 Franklin/Templeton 77
5 Putnam 76
PRO FORMA 64
TAXABLE BONDS
PRO FORMA $35
1 Vanguard 30
2 Putnam 22
3 Morgan Stanley 21
4 Fidelity 19
5 Pimco Advisors 19
TAX FREE BONDS
1 Franklin/Templeton $43
2 Nuveen 31
PRO FORMA 20
3 Vanguard 20
4 Dreyfus 17
5 Merrill Lynch 17
Source: Strategic Insight, As of 12/31/96.
</TABLE>
26
<PAGE>
Product Breadth
Mutual Funds
(The following data is represented by a pie chart in the original document.)
<TABLE>
306 Mutual Funds
<S> <C>
Fixed Income 37%
International Equity 11%
Money Market 19%
U.S. Equity 33%
Pro Forma: $146.5bn
Source: Strategic Insight; As of 12/31/96.
</TABLE>
27
<PAGE>
Credit Cards
<PAGE>
Card Industry Is An Attractive Business
Sizable Market
$16 Trillion in Charge Volumes
$460 Billion in Receivables
Expected Growth: 15-20%
Attractive Operating Margin: 30%+
Attractive ROE: 20%+
High Barriers to Entry
Scale
Technology
Marketing
Brand Name
Sources: The Nilson Report or publicly available data.
28
<PAGE>
Cards Are Projected to Gain Share
(The following data is represented by a bar chart in the original document.)
<TABLE>
<CAPTION>
Total Consumer Spending Total Credit Card Payments
<C> <C> <C>
1990 15% $2,972
1994 18% $3,619
2000 28% $5,093
2005 32% $6,806
Source: The Nilson Report.
</TABLE>
29
<PAGE>
Leadership in Cards
($ Billions)
<TABLE>
Charge Volume(1)
<CAPTION>
($Bn)
<C> <C>
1 American Express $124.4
2 Dean Witter, Discover & Co. 53.6
3 Citibank 44.9
4 First Chicago NBD 21.3
5 MBNA 20.3
6 Banc One/First USA 16.5
7 Household Bank 15.6
8 Chase Manhattan 15.1
9 AT&T 12.7
10 BankAmerica 9.6
11 NationsBank 9.2
12 Advanta 8.7
13 Capital One 8.0
14 Wells Fargo 5.0
15 Bank of New York 4.7
Total $369.6
Managed Loans(2)
($Bn)
1 Citibank $42.8
2 Dean Witter, Discover & Co. 32.4
3 MBNA 28.9
4 Banc One/First USA 28.4
5 Chase Manhattan 23.5
6 First Chicago NBD 17.5
7 Household Bank 16.6
8 AT&T 13.2
9 Advanta 12.7
10 Capital One 11.2
11 American Express 10.5
12 BankAmerica 9.4
13 NationsBank 8.9
14 Wells Fargo 6.7
15 First Union 5.9
Total $268.6
Notes: (1) As of June 30, 1996. Sources: Nilson Report, Company reports.
(2) Managed loans as of period end June 30, 1996.
</TABLE>
30
<PAGE>
Credit Services
($ Billions)
(The following data is represented by two bar charts in the original document.)
<TABLE>
Managed Loans
<C> <C>
1991 $17
1992 $19
1993 $21
1994 $26
1995 $32
1996 $37
CAGR 16.8%
Transaction Volume
1991 $22
1992 $28
1993 $33
1994 $40
1995 $48
1996 $54
CAGR 19.7%
</TABLE>
31
<PAGE>
Pro Forma Financials -- 1996
($ Millions)
<TABLE>
<CAPTION>
Morgan Stanley,
Morgan Dean Witter, Dean Witter,
Stanley(1) Discover & Co.(2) Discover & Co.
<S> <C> <C> <C>
Net Revenues $5,776 $6,230 $12,006
Net Income Available to Common 963 951 1,914
ROE 20.9% 19.0% 19.9%
Profit before Tax Margin 27.2% 24.8% 26.0%
Assets $196,902 $42,414 $239,316
Common Equity 5,393 5,164 10,557
(1) For the fiscal year ended 11/30/96.
(2) For the fiscal year ended 12/31/96.
</TABLE>
32
