Household International and Beneficial Corporation Announce Merger Agreement

Strategic Insights -

Household International and Beneficial Corporation, two leading consumer finance companies, announced a definitive merger agreement on April 7, 1998, creating one of the country's leading consumer finance and credit card companies. The merger, worth over $8.6 billion, will combine the strengths of both companies, resulting in a market capitalization of $24 billion, managed receivables of $62 billion, and over 30 million customer accounts.

Key Takeaways:

  • The merger will create a leading consumer finance company in the US, with combined 1997 managed revenues of over $7 billion.
  • Beneficial shareholders will receive 1.0222 shares of Household common stock for each share of Beneficial common stock in a fixed exchange ratio, valued at $150 per Beneficial share.
  • The transaction will be accounted for as a pooling of interests and is expected to be tax-free to Beneficial shareholders.
  • The combined company will have 163 million outstanding common shares, before giving effect to Household's previously announced three-for-one stock split effective for shareholders of record on May 14, 1998.
  • Approximately 67% of the combined company shares will be owned by current Household shareholders, and 33% by current Beneficial shareholders.
  • The Board of the combined entity will have 17 members, including four previous Beneficial board members.
  • Household and Beneficial have granted each other cross options for 19.9% of the common stock outstanding of the separate entities.
  • The companies expect the transaction to be accretive to Household's earnings beginning in 1999, based on growth opportunities and projected annual cost savings of approximately $450 million.
  • The management of Household has a proven track record of bringing companies together, and the integration is expected to proceed smoothly, with minimal disruptions for customers.

Statistics:

  • Total value of the merger transaction: over $8.6 billion
  • Total market capitalization: $24 billion
  • Combined 1997 managed revenues: over $7 billion
  • Managed receivables: $62 billion
  • Number of customer accounts: over 30 million
  • Cost savings: approximately $450 million per year
  • Household's closing price on April 6, 1998: $150 per share

Sources:

  • Household International and Beneficial Corporation announcement, April 7, 1998, quoted in Business Wire.
  • Household International Current Form 10K, filed with the Securities and Exchange Commission.
  • Beneficial Corporation Current Form 10K, filed with the Securities and Exchange Commission.
  • Goldman, Sachs & Co. and Merrill Lynch & Co. (financial advisors to Beneficial).
  • Morgan Stanley Dean Witter & Co. (financial advisor to Household).