Beneficial Corp., the nation's largest independent consumer finance company, announced Thursday that it is planning a major corporate restructuring to boost shareholder values that could include selling the company or some assets, a merger or buying back stock or debt.
Finn M. W. Caspersen, Beneficial chairman and chief executive, also told shareholders in a letter that Beneficial will add reserves to cover possible losses from part of its insurance business. The extra reserves will result in a net loss for the year, he said.
The announcement was prompted in part by news that Allegheny Corp. has been buying Beneficial stock and has informed the Federal Trade Commission that it plans to purchase up to 15% of Beneficial's voting stock, Caspersen said.
Plan to Boost Value
But the restructuring is "absolutely not" an anti-takeover measure, Caspersen said in an interview. Rather, the corporate overhaul is "absolutely" a plan to boost shareholder values that was first considered early this year, he said.
Beneficial is only "halfway down the road" toward deciding what it will do, Caspersen said. The Wilmington, Del., company and its financial adviser, First Boston Corp., are considering "the full range of tactical and strategic alternatives," which may include the sale of Beneficial, a merger with another company, the sale of assets, the spinoff of subsidiaries or the repurchase of debt and equity securities.
Caspersen said he couldn't predict which alternatives will be recommended. The decision will be made "within a matter of months," he said.
In connection with the restructuring, Beneficial's board authorized "a value-created incentive cash bonus plan" that will pay "certain key executives" up to a total of 7% of the increase in the company's stock price above $70 per share. The plan would go into effect if the company is sold, if a major restructuring is accomplished or at the end of 1987, whichever comes first. Beneficial's board also authorized employment contracts for some officers.
Beneficial also will add reserves of about $260 million (pretax) or about $150 million (after tax) to its property and casualty reinsurance reserves to cover losses related to the company's discontinued property and casualty reinsurance business. Because of the additional reserves, Beneficial will record a net loss for the year, which Caspersen declined to predict.
"It will go negative for the year," he said. "It would have been a very good year for us otherwise."
In 1985, Beneficial had net income of $101.2 million on revenue of $2.06 billion, compared to net income of $106.3 million on revenue of $1.8 billion in 1984.
Although Beneficial's announcement was made after the market closed, Wall Street had anticipated news of the additional reserves, Caspersen said. Beneficial's stock fell $1.62 1/2 to close at $44.50 on the New York Stock Exchange.
During the past several years, Beneficial has sold businesses that are unrelated to consumer finance services after an unsuccessful diversification attempt. Beneficial sold a Texas savings and loan association in 1980, divested its Spiegel mail-order catalogue operations in 1981 and unloaded its Western Auto Supply business in December.