SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported): February 4, 1997
Dean Witter, Discover & Co.
(Exact name of registrant as specified in its charter)
Delaware 1-11758 36-3145972
(State or Other (Commission File (IRS Employer
Jurisdiction Number) Identification Number)
of Incorporation)
Two World Trade Center, New York, New York 10048
(Address of principal executive offices) (Zip Code)
(212) 392-2222
(Registrant's telephone number, including area code)
None
(Former Name or Former Address, if Changed Since Last Report)
<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 Dean Witter, Discover & Co. and Morgan
Stanley Group Inc. 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 Dean Witter, Discover & Co. and
Morgan Stanley Group Inc.
99.2 Joint Presentation regarding the proposed merger made at a
press conference on February 5, 1997.
<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.
DEAN WITTER, DISCOVER & CO.
------------------------------
(Registrant)
Date: February 12, 1997 By: /s/ Ronald T. Carman
----------------- ---------------------------
(Signature)
Name: Ronald T. Carman
Title: Senior Vice President and
Associate General Counsel
<PAGE>
EXHIBIT INDEX
Exhibit Description Page
99.1 Press release dated February 5, 1997 announcing
the signing of an agreement to merge Dean Witter,
Discover & Co. and Morgan Stanley Group Inc.
99.2 Joint Presentation regarding the proposed merger
made at a press conference on February 5, 1997.
EXHIBIT 99.1
MORGAN STANLEY DEAN WITTER, DISCOVER & CO.
- -----------------------------------------------------------------------
FOR IMMEDIATE RELEASE
Contacts:
Jeanmarie McFadden Tim Lee Paul Verbinnen/George Sard
Morgan Stanley & Co. Dean Witter, Sard Verbinnen & Co.
212/761-4059 Discover & Co. 212/687-8080
212/392-8709
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.
Philip 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 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
<PAGE>
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 must 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 the
transaction, each company granted the other an option, exercisable
under certain conditions, to acquire shares representing 19.9% of its
outstanding shares.
<PAGE>
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 positions in debt
and equity underwriting.
EXHIBIT 99.2
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
o Accelerated Growth
o Highly Profitable
o Highest Quality
<PAGE>
Creating the Preeminent Global Financial Services Firm
ENGINES: POWERFUL FRANCHISES
o Leading Global Securities Firm
o Leading Global Asset Manager
o Leading Global Credit Card Company
<PAGE>
Creating the Preeminent Global Financial Services Firm
VALUE DRIVERS
o Preeminent Brands
o Quality Professionals
o Proprietary Distribution
o Multiple Channels
o Broad Customer Relationships
o Global Platform
o Size and Scale
<PAGE>
Powerful Franchises
o Three Powerful Brand Names and Franchises
o Premier Global Investment Bank
o Leading Domestic Retail Securities Firm
o Two Substantial Asset Management Businesses
o Leading Credit Card Company
<PAGE>
Complementary Origination and Distribution
o Supply Morgan Stanley Product Through Dean Witter
Distribution
- Top Ranked Research
- Underwritten Equity and Fixed Income
- Global Products
o Enhanced Retail Distribution Strength
- Increased AE Productivity
- Enhanced Ability to Attract and Retain AEs
- Accelerated AE Growth
o Expands Origination Capability
- Increased Lead Managed Underwritings
- Enhanced Corporate Relationships
<PAGE>
Powerful Asset Management Platform
o Top 5 Globally in Total Assets
- $271 BN in AUM
o Multiple Channels and Brands
- InterCapital
- Morgan Stanley
- Van Kampen American Capital
o Balanced Product Mix
o Poised to Grow in Changing Market Environments
o Leverage Strengths Across Brands
- Investment Performance
- International Products
o Positioned to Expand Globally
- Europe
- Emerging Markets
<PAGE>
Creating the Preeminent Global Financial Services Firm
o 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)
o Balanced Earnings Stream
- Securities
- Asset Management
- Cards
o Size and Scope
- Scale in Scale Businesses
- Enhanced Capacity for Investment
o Opportunities for Future Consolidation
<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
<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
<PAGE>
Financial Strength
Size and Scope: o $21Bn in Market Capitalization
o $11Bn in Common Equity
o $12Bn Net Revenues
o $3Bn Pre-tax Income
<PAGE>
Leading Franchises in Attractive Businesses
Securities/ o #1 Global M&A
Investment Banking: o #1 IPOs(1)
o #1 U.S. Equity(1)
o #2 in Equity Research
o #3 in Retail Account Executives
- 9,300
o 409 Offices Worldwide
o 21 Countries
o 3.2mm Retail Customers
Note: (1) Full credit to each manager. Source: Securities
Data Company.
<PAGE>
Leading Franchises in Attractive Businesses
Asset Management: o Top 5 Globally in Asset Management
($271Bn)
o #5 in Mutual Funds ($146Bn)
- 7mm Shareholders
Credit Cards: o #1 in Credit Cards (39mm)
o #3 in Managed Loans ($37Bn)
o #2 in Charge Volume ($54Bn)
o Proprietary Merchant Network
<PAGE>
Growth Businesses
Industry Growth Rates
10 Year 1 Year
------- ------
INVESTMENT BANKING AND SECURITIES
NYSE Trading Volume 10.8% 19.9%
Global Equity Underwriting(1) 19.0 40.5
Global M&A(1) 8.7 16.5
ASSET MANAGEMENT
Mutual Funds(2) 18.9 22.5
CREDIT CARDS
Card Receivables(3) 18.0 27.2
Notes: (1) Source: Securities Data Company.
(2) Source: Strategic Insight.
(3) Source: The Nilson Report.
<PAGE>
Size and Scale
($ Billions)
Common Equity(1)
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 $ 2.4
PaineWebber $ 0.6
Notes: (1) At or for the latest fiscal year end.
(2) As of 9/30/96.
<PAGE>
Size and Scale
($ Billions)
Market Capitalization(1)
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
<PAGE>
Market Valuation
Price/Earnings Ratios(1)
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.
<PAGE>
SECURITIES/INVESTMENT BANKING
<PAGE>
Leading Strategic Advisor
Global M&A
Announced Transactions
Total Value
1996
-----------
1 Morgan Stanley $238 Bn
2 Merrill Lynch 204
3 Goldman, Sachs 166
4 Lazard Houses 131
5 J.P. Morgan 121
<PAGE>
Top-Ranked Equity Research: Global
Analyst Rankings(1)
# of First Second Third Runner
Analysts Team Team Team Up
-------- ----- ------ ----- ------
Merrill Lynch 90 20 16 28 26
MORGAN STANLEY 74 20 20 11 23
Goldman Sachs 57 17 12 14 14
Smith Barney 23 5 5 6 7
PaineWebber 19 9 3 3 4
Note: (1) Source: Institutional Investor. Includes North
America, Non-Japan Asia, Europe and Latin America equity
research analysts.
<PAGE>
Distribution Strength: Retail
Account Executives (000's)
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)
<PAGE>
Distribution Strength: Equity
Independent Survey: Top 100 Institutions(1)
Equity Underwriting Franchise Sales Penetration
- ----------------------------- -----------------
1 Morgan Stanley 1 Morgan Stanley
2 Goldman Sachs 2 DLJ
3 Alex Brown 3 Smith Barney
4 DLJ 4 Merrill Lynch
5 Merrill Lynch 5 Goldman Sachs
Research Franchise Trading Acumen
- ------------------ -------------------
1 Morgan Stanley 1 Morgan Stanley
2 Goldman Sachs 2 Lehman Brothers
3 Merrill Lynch 3 Smith Barney
4 DLJ 4 Salomon Brothers
5 Cowen 5 DLJ
Note: (1) Based on independent annual survey of managers at
top 100 institutions.
<PAGE>
Distribution Strength: Domestic
Dean Witter Offices
361 Branches
[map omitted]
<PAGE>
Distribution Strength: Global
Morgan Stanley Offices
38 Offices in 21 Countries
[map omitted]
<PAGE>
Leading Originator - Global Equity
Worldwide Common Stock Underwriting(1)
Total Proceeds
1996
--------------
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.
<PAGE>
ASSET MANAGEMENT
<PAGE>
Asset Management Industry
o Sizable Market
- $10 Trillion(1)
o High Growth
o High Margin
o Attractive ROE
o Significant Barriers to Entry
- Brand Name
- Investment Performance
- Marketing
- Distribution
- Technology
- Scale
Note: (1) Source: Intersec.
<PAGE>
Assets Under Management
($ Billions)(1)
Fidelity $496
PRO FORMA $271
Vanguard $250
Merrill Lynch $234
Franklin/Templeton $181
Travelers $112
Note: (1) Financial information as of 12/31/96. Based on
public information, if available, or company estimates.
<PAGE>
Leading Asset Manager
Mutual Funds
($ Billions)
ALL MUTUAL FUNDS
(Excl. Money Market)
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 FUNDS
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.
<PAGE>
Product Breadth
Mutual Funds
306 Mutual Funds
U.S. Equity 33%
Money Market 19%
International Equity 11%
Fixed Income 37%
Pro Forma: $146.5bn
Source: Strategic Insight; As of 12/31/96.
<PAGE>
CREDIT CARDS
<PAGE>
Card Industry Is An Attractive Business
o Sizable Market
- $16 Trillion in Charge Volumes
- $460 Billion in Receivables
o Expected Growth: 15-20%
o Attractive Operating Margin: 30%+
o Attractive ROE: 20%+
o High Barriers to Entry
- Scale
- Technology
- Marketing
- Brand Name
Source: The Nilson Report or publicly available data.
<PAGE>
Cards Are Projected to Gain Shares
Total Consumer Spending
($Billions) Total Credit Card Payments (%)
- ------------------------ ------------------------------
1990 $2,972 15%
1994 $3,619 18%
2000 $5,093 28%
2005 $6,806 32%
<PAGE>
Leadership in Cards
($ Billions)
Charge Volume(1) Managed Loans(2)
- ------------------------------ ---------------------------------
($Bn) ($Bn)
1 American Express $124.4 1 Citibank $42.8
2 Dean Witter, 53.6 2 Dean Witter, Discover 32.4
Discover & Co. & Co.
3 Citibank 44.9 3 MBNA 28.9
4 First Chicago NBD 21.3 4 Bank One/First USA 28.4
5 MBNA 20.3 5 Chase Manhattan 23.5
6 Banc One/First USA 16.5 6 First Chicago NBD 17.5
7 Household Bank 15.6 7 Household Bank 16.6
8 Chase Manhattan 15.1 8 AT&T 13.2
9 AT&T 12.7 9 Advanta 12.7
10 BankAmerica 9.6 10 Capital One 11.2
11 NationsBank 9.2 11 American Express 10.5
12 Advanta 8.7 12 BankAmerica 9.4
13 Capital One 8.0 13 NationsBank 8.9
14 Wells Fargo 5.0 14 Wells Fargo 6.7
15 Bank of New York 4.7 15 First Union 5.9
------ -----
Total $369.6 Total $268.6
====== ======
Note: (1) As of June, 1996. Source: Nilson Report, Company
reports.
(2) Managed loans as of period end June 30, 1996.
<PAGE>
Credit Services
($ Billions)
Managed Loans Transaction Volume
CAGR 16.8% CAGR 19.7%
--------------- ------------------
1991 $17 1991 $22
1992 $19 1992 $28
1993 $21 1993 $33
1994 $26 1994 $40
1995 $32 1995 $48
1996 $37 1996 $54
<PAGE>
Pro Forma Financials - 1996
($ Millions)
Morgan Stanley
Dean Witter, Dean Witter,
Morgan Stanley(1) Discover & Co.(2) Discover & Co.
----------------- ----------------- --------------
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.
