Household, Conseco Make Acquisitions
Household International Inc. and Conseco Inc. announced acquisitions worth a combined $14.75 billion Tuesday, continuing a consolidation in the financial services industry that saw its most startling example Monday with the largest merger ever.
But unlike the warm reception investors gave the record $83-billion deal announced Monday between Citicorp and Travelers Group, Household and Conseco saw their shares tumble Tuesday.
Household said it agreed to buy Beneficial Corp. for about $8.25 billion in stock, a deal that would create one of the nation’s largest consumer finance and credit card companies.
Conseco agreed to buy Green Tree Financial Corp., a money-losing consumer lender, in a transaction valued at about $6.5 billion.
The deals are valued at only a fraction of the Citicorp and Travelers deal, but Conseco and Green Tree cited similar motivations--complementary business that should benefit from having access to an expanded base of customers.
“Large and small of these [financial services] deals will continue,” said Chet Needelman, chief of Palley-Needelman Asset Management in Newport Beach. His firm, which manages about $4.5 billion, has 25% of its assets invested in financial stocks, including Beneficial.
Prospect Heights, Ill.-based Household would pay about 1.02 of its shares for each Beneficial share. After the purchase, Household, No. 2 in consumer finance after Associates First Capital Corp., would have 30 million customers, $62 billion of receivables and more than 2,000 branches across the country as well as in Britain, Ireland and Canada.
Household expects to cut about $450 million in annual costs by closing branches and cutting duplication in computer and clerical positions. The company plans to take a $1-billion charge to pay for the cost cuts when the purchase is completed, probably in the third quarter.
Beneficial’s shares rose $7.44 to $137.94 on the New York Stock Exchange. But Household’s shares sank $6 to $140.75.
Conseco, a life and health insurer, got a far worse reception for its plan to swap about 0.92 share for each share of Green Tree, a St. Paul, Minn.-based lender. While Green Tree jumped $9.88 to $38.88 on the NYSE, shares of Carmel, Ind.-based Conseco plunged $8.63, or 15%, to $49.13.
Analysts cited concern over the price Conseco is paying and its entry into a new industry.
Green Tree makes home equity loans and also lends money for purchases ranging from pianos to prefabricated homes. Its other businesses include private-label credit cards for retailers, commercial financial services and insurance brokerage.
Separately, GreenPoint Financial Corp. is close to an agreement to buy BankAmerica Corp.’s mobile-home finance unit for about $700 million, expanding its consumer finance business, said people familiar with the situation.
The purchase would make Greenpoint, a New York-based thrift, the second-largest mobile-home lender in the U.S., behind Green Tree Financial. Third-ranked Associates First Capital also bid for the BankAmerica unit, the people said.
The acquisition of BankAmerica Housing Services would give GreenPoint a loan-generating machine that it can fund with deposits from its New York-area branches. BankAmerica’s San Diego-based unit has more than 1,400 employees and 45 offices in 31 states.
