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Manufacturers Hanover Will Sell Unit

April 12, 1988|From Reuters

NEW YORK — Manufacturers Hanover Corp., suffering from soured Third World loans, has tentatively agreed to sell its consumer finance unit to American General Corp., an insurance industry holding company, for $685 million.

Manufacturers Hanover, the sixth-largest U.S. bank holding company, has in recent years bolstered sagging earnings by selling assets. Analysts predicted Monday that the banking company would continue this strategy in 1988.

American General, with interests in health, life and property insurance, as well as in tax-qualified annuities, consumer credit and real estate, said it reached an agreement in principle for its Credithrift Financial Corp. subsidiary to acquire Manufacturers Hanover Consumer Services Inc.

Completion is subject to a final agreement and to approval of boards of both companies, said Houston-based American General.

"This move represents another large restructuring action, which will enhance Manufacturers' equity capital base," said Salomon Inc.'s Thomas Hanley. "But, we are going to see further significant asset sales in 1988."

Felice Gelman of Dillon Read & Co. agreed, predicting that the bank will sell real estate rather than operating units.

"Manufacturers Hanover has a lot of assets it could sell," Gelman said. Those could include its headquarters, estimated to be worth about $1 billion, other real estate and $100 million to $150 million in residuals in equipment leases.

However, Lawrence Cohn of Merrill Lynch & Co. thinks that most of Manufacturers Hanover's big asset sales are over.

"Now we'll see lots of little stuff, including a piece of property in London," Cohn said, adding that the bank is unlikely to sell its commercial finance unit, the CIT Group.

In a separate announcement, Manufacturers Hanover, based in New York, said it would receive an estimated $20 million in cash dividends representing its subsidiary's earnings from Jan. 1 to the date of the transaction's closing, bringing the total value to $705 million.

Manufacturers Hanover said the proposed sale would result in an expected pre-tax gain of about $300 million, which, after the recognition of tax benefits relating to the addition to reserve for possible credit losses in 1987, would add about $275 million to its common shareholders' equity.

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