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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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): April 30, 1997
Dean Witter, Discover & Co.
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(exact name of registrant as specified in its charter)
Delaware 1-11758 36-3145972
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) Number)
Two World Trade Center, New York, New York 10048
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(Address of principal executive offices)(Zip code)
Registrant's telephone number, including area code: (212) 392-2222
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(Former name or former address, if changed since last report.)
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Item 5. OTHER EVENTS
As previously disclosed in Dean Witter, Discover & Co.'s ("DWD") Current Report
on Form 8-K dated February 4, 1997, DWD and Morgan Stanley Group Inc. ("Morgan
Stanley") announced a definitive agreement to merge (the "Merger"). This
transaction is intended to be accounted for as a pooling of interests and the
new company will be named Morgan Stanley, Dean Witter, Discover & Co. Under the
terms of the definitive agreement each of Morgan Stanley's common shares will be
exchanged for 1.65 of DWD's common shares. The Merger, which is expected to be
completed in mid-1997, is subject to customary closing conditions, including
certain regulatory approvals and the approval of the stockholders of both
companies.
Attached and incorporated by reference as Exhibit 99.1 is the unaudited pro
forma condensed combined statement of financial condition for the combined
entity giving effect to the Merger.
Item 7(c). FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENT AND EXHIBITS
Exhibit No. Description
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99.1 The Morgan Stanley, Dean Witter, Discover & Co. unaudited pro forma
condensed combined statement of financial condition at March 31, 1997.
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SIGNATURE
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, thereto duly authorized.
DEAN WITTER, DISCOVER & CO.
______________________________
(Registrant)
By: /s/ Ronald T. Carman
______________________________
Ronald T. Carman
Senior Vice President
Dated : April 30, 1997
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Exhibit No. Description
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99.1 The Morgan Stanley, Dean Witter, Discover & Co. unaudited pro forma
condensed combined statement of financial condition at March 31, 1997.
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EXHIBIT 99.1
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF FINANCIAL
CONDITION
MORGAN STANLEY, DEAN WITTER, DISCOVER & CO.
The following unaudited pro forma condensed combined statement of financial
condition combines the historical consolidated balance sheet of Dean Witter,
Discover and Co. ("DWD") and the historical consolidated statement of financial
condition of Morgan Stanley Group Inc. ("Morgan Stanley") giving effect to the
Merger as though it had been consummated on February 28, 1997 after giving
effect to the pro forma adjustments described in the notes to the unaudited pro
forma condensed combined statement of financial condition. This information
should be read in conjunction with the audited consolidated financial statements
and other financial information contained in DWD's Annual Report on Form 10-K
for the year ended December 31, 1996, the unaudited consolidated interim
financial statements contained in DWD's Quarterly Report on Form 10-Q for the
period ended March 31, 1997, including the notes thereto,and the audited
consolidated statements and other financial information contained in Morgan
Stanley's Annual Report on Form 10-K for the fiscal year ended November 30, 1996
and the unaudited consolidated interim financial statements contained in Morgan
Stanley's Quarterly Report on Form 10-Q for the period ended February 28, 1997,
including the notes thereto. This unaudited pro forma condensed combined
statement of financial condition is not necessarily indicative of the financial
position that might have been achieved had the merger occurred as of March 31,
1997 nor is it necessarily indicative of financial position which may occur in
the future.
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MORGAN STANLEY, DEAN WITTER, DISCOVER & CO.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF FINANCIAL CONDITION
(IN MILLIONS)
<TABLE>
<CAPTION>
DWD Morgan Stanley
Historical Historical Pro Forma Pro Forma
March 31, 1997 February 28, 1997 Adjustments (a) Combined
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<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $1,185 $4,488 $5,673
Cash and securities deposited with clearing organizations
or segregated under federal and other regulations 2,151 1,490 3,641
Financial instruments owned:
U.S. government and agency securities 899 15,219 16,118
Other sovereign government obligations 0 18,205 18,205
Corporate and other debt 40 17,905 17,945
Corporate equities 1,380 14,242 15,622
Derivative contracts 0 12,818 12,818
Physical commodities 0 287 287
Securities purchased under agreements to resell 3,897 70,029 73,926
Securities borrowed 4,731 50,394 55,125
Receivables:
Consumer loans (net of allowances of $819) 21,148 0 21,148
Customers, net 2,881 10,368 13,249
Brokers, dealers and clearing organizations 0 1,995 1,995
Fees, interest and other 828 2,524 3,352
Other assets 3,120 4,808 7,928
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Total assets $42,260 $224,772 $267,032
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LIABILITIES AND STOCKHOLDERS' EQUITY
Commercial paper and other short-term borrowings $4,381 $22,241 $26,622
Deposits 7,138 0 7,138
Financial instruments sold, not yet purchased:
U.S. government and agency securities 1,624 13,991 15,615
Other sovereign government obligations 0 8,355 8,355
Corporate and other debt 57 1,242 1,299
Corporate equities 15 8,762 8,777
Derivative contracts 0 11,006 11,006
Physical commodities 0 36 36
Securities sold under agreements to repurchase 3,979 95,919 99,898
Securities loaned 4,855 10,432 15,287
Payables:
Customers 3,175 21,041 24,216
Brokers, dealers and clearing organizations 0 4,113 4,113
Interest and dividends 148 1,244 1,392
Other liabilities and accrued expenses 3,738 2,425 6,163
Long-term borrowings 7,690 16,470 24,160
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36,800 217,277 254,077
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Capital Units 0 999 999
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Commitments and contingencies
</TABLE>
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MORGAN STANLEY, DEAN WITTER, DISCOVER & CO.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF FINANCIAL CONDITION
(IN MILLIONS)
<TABLE>
<CAPTION>
DWD Morgan Stanley
Historical Historical Pro Forma Pro Forma
March 31, 1997 February 28, 1997 Adjustments (a) Combined
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<S> <C> <C> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Stockholders' equity:
Preferred stock 0 1,027 1,027
Common stock 3 164 (161) (b) 6
Paid-in capital 2,713 892 161 (b) 3,766
Retained earnings 3,204 4,767 (264) (b) 7,707
Cumulative translation adjustments 0 (14) (14)
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Subtotal 5,920 6,836 (264) 12,492
Less:
Stock compensation related deductions 8 76 84
Common stock held in treasury, at cost 452 264 (264) (b) 452
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Total stockholders' equity 5,460 6,496 0 11,956
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Total liabilities and stockholders' equity $42,260 $224,772 $0 $267,032
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</TABLE>
See Notes to the Unaudited Pro Forma Condensed Combined Statement of Financial
Condition.
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NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF FINANCIAL CONDITION
Note (a): Basis of Presentation
The unaudited pro forma condensed combined statement of financial condition
combines the historical consolidated balance sheet of DWD at March 31, 1997 with
the historical consolidated statement of financial condition of Morgan Stanley
at February 28, 1997. Certain amounts reflected in the historical statement of
financial condition presentations of both companies have been reclassified to
conform to the unaudited pro forma condensed combined presentation.
The unaudited pro forma condensed combined statement of financial condition
excludes (i) the effect of any potential changes in revenues or any operating
synergies which may be achieved upon combining the resources of the companies
(ii) investment banking, legal and miscellaneous transaction costs of the
Merger, which will be reflected as an expense in the period the Merger is
consummated, and (iii) costs associated with the integration and consolidation
of the companies which are not presently estimable.
Transaction between DWD and Morgan Stanley are not material in relation to the
unaudited pro forma condensed combined statement of financial condition and
therefore, intercompany balances have not been eliminated from the pro forma
combined amounts. DWD and Morgan Stanley are in the process of reviewing their
respective accounting policies and do not expect there to be any significant
adjustments necessary in order to conform such policies.
In January 1997, DWD acquired Lombard Brokerage, Inc. which was accounted for as
a purchase transaction. During 1996, Morgan Stanley acquired Miller Anderson &
Sherrerd, LLP and Van Kampen American Capital, Inc., both accounted for as
purchase transactions. In April 1997, Morgan Stanley announced the acquisition
of the institutional global custody business of Barclays PLC. No pro forma
effect has been given to these transactions as the effect is not material.
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NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF FINANCIAL CONDITION
Note (b): Pro Forma Adjustments
The pro forma adjustments to common stock, paid-in capital and retained earnings
accounts at March 31, 1997 reflect (i) an exchange of 158.0 million shares of
common stock, par value $1.00 per share of Morgan Stanley for 260.7 million
shares (using the exchange ratio of 1.65) of common stock, par value $.01 per
share of DWD and (ii) the cancellation and retirement of all shares of Morgan
Stanley common stock held in treasury. The number of shares of DWD common stock
to be issued at consummation of the Merger will be based upon the actual number
of shares of Morgan Stanley common stock outstanding at that time.
