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SMITH BARNEY & SHEARSON LEHMAN BROTHERS' RETAIL BROKERAGE & ASSET MGMT. BUSINESSES TO MERGE: PRIMERICA & AMERICAN EXPRESS REACH AGREEMENT

 NEW YORK, March 12 /PRNewswire/ -- Primerica Corporation (NYSE: PA) and American Express Company (NYSE: AXP) today announced that the companies had signed a definitive agreement to combine Primerica's Smith Barney subsidiary and the domestic retail brokerage and asset management businesses of Shearson Lehman Brothers Inc., an American Express subsidiary.
 The combined firm will be named Smith Barney Shearson and will be headed by Frank G. Zarb, Smith Barney's chairman and chief executive officer. Joseph J. Plumeri, II, managing partner of Shearson Lehman Brothers, will serve as president, responsible for retail sales and marketing.
 Under the terms of the agreement, the approximate cost of the transaction to Primerica is $1 billion. American Express will receive $850 million in cash, $125 million in Primerica convertible preferred stock, and $25 million in Primerica common equity warrants. In addition, Primerica has agreed to pay American Express future contingent amounts based upon the new unit's performance, consisting of up to $50 million per year for three years, plus l0 percent of after-tax profits in excess of $250 million per year over a five-year period.
 The proposed transaction, which has been approved by the boards of both Primerica and American Express, is expected to be completed by early July. Various regulatory approvals are required, including Hart Scott Rodino and the New York Stock Exchange.
 Sanford I. Weill, Primerica's chairman and chief executive officer, said, "We are very excited about this special opportunity to create Smith Barney Shearson, and it is a personal pleasure for me to be reunited with so many old friends. With this transaction, Smith Barney takes a quantum leap forward in achieving what would have required years to develop internally, and Shearson's brokers and support staff benefit from Primerica's commitment to building our presence in the securities industry.
 "At the same time," Weill added, "Primerica instantly enhances our earnings power and joins the leading ranks of asset managers, with more than $112 billion under the combined auspices of Smith Barney Shearson, American Capital and RCM Capital Management."
 Combination of Strengths
 In assessing the industry stature of the new entity, Mr. Zarb, who is also a vice chairman of Primerica, said, "Smith Barney Shearson will be a unique firm, squarely focused on serving our clients' needs and helping them meet the challenges of investing in the '90s and into the 21st century. With over 10,500 brokers and almost 500 branch offices, our distribution power and access to investors will serve as a valuable conduit for securities issuers in both the corporate and municipal sectors.
 "By combining the rich cultures and strengths of these two organizations," Zarb said, "we will be second to none in our ability to serve high net worth investors, and the institutional community, with the asset management services, sophisticated products and state-of-the- art transaction processing capabilities they require."
 Terms of the transaction also include an arrangement whereby American Express' Lehman Brothers Unit will provide the merged company with certain capital markets trading services, investment banking product and securities research for periods ranging from one to two years.
 American Express' Focus
 "The decision to sell these operations is part of our objective to focus on building the American Express brand franchise around our three principal subsidiaries: Travel Related Services, IDS Financial Services and American Express Bank," said Harvey Golub, president and chief executive officer of American Express Company. As part of this plan, American Express announced last week that it intends to reduce its holdings in First Data Corporation (FDC) to less than 25 percent through a secondary offering of common shares. A previously announced agreement to sell The Boston Company (TBC), a unit of SLB, to Mellon Bank Corporation, is expected to close next month.
 The agreement does not include Lehman Brothers or the financial consultants who conduct business under the Lehman name in the U.S. and abroad. "The franchise we are retaining in Lehman Brothers comprises some of Wall Street's leading institutional sales, trading, underwriting and advisory businesses," Mr. Golub said. In recognition of the fact that it will be a much different firm going forward, it will be renamed Lehman Brothers Inc. when the transaction closes.
 As a result of this transaction, AXP will recognize a first quarter loss of approximately $630 million, which includes taxes, transaction- related costs such as severance, relocation and systems modifications, and a reduction in goodwill of $750 million. SLB will also recognize an after-tax charge of approximately $100 million related to reserves for certain non-core businesses. The loss on this transaction will be offset in part by the previously announced gain on the sale of TBC and the anticipated gain on the sale of shares in FDC.
 "The decision we announced today will accelerate our plans to build long-term value for shareholders and to sharpen our focus on customers in those markets where we have significant competitive advantages," said Mr. Golub.
 As previously reported, American Express had estimated that an additional $1 billion of tangible equity would be required for its securities business to achieve a single-A rating on a stand-alone basis. The transaction, along with the related reserves, reduces that shortfall to approximately $400 million and significantly improves asset quality.
 Funding the Purchase
 Primerica anticipates funding the cash portion of the transaction, and strengthening Smith Barney's capital base, by issuing to the public $550 million in new debt securities and approximately $500 million in an equity equivalent security. The $125 million of Convertible Preferred Stock to be issued to American Express yields 5.5 percent and is convertible into 2.551 million shares of Primerica common stock at a price of $49 per share. The terms of the equity warrants to be issued to American Express will be determined so as to provide $25 million in value based upon a $40 Primerica share price.
 Primerica Corporation is a diversified financial services company principally engaged in investment services, consumer finance services and insurance services. As of Dec. 31, 1992, Primerica had assets of approximately $23 billion and book value of approximately $23.60 per common share. Its Smith Barney subsidiary reported the best results in the firm's 120-year history in 1992 of $170.1 million in earnings (before purchase accounting adjustments) and $1.7 billion in gross revenues.
 American Express Company, a diversified travel and financial services company founded in 1850, is a world leader in charge cards, Travelers Cheques and travel related activities. It is also a leader in financial planning, international banking and investment banking.
 -0- 3/12/93
 /CONTACT: Mary McDermott, 212-891-8870, or Barbara Yastine, 212-891-8872, of Primerica; Michael O'Neill, 212-640-5951, or Susan Miller, 212-640-4953, both of American Express/
 (PA AXP)


CO: Primerica Corporation; American Express Company ST: New York IN: FIN SU:

SH -- NY016 -- 8694 03/12/93 10:49 EST
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Publication:PR Newswire
Date:Mar 12, 1993
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