-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ATnZvAg0/i9zwhSrMqv70MBABwE8PrtZETnp/jAUjYd5hRBWgN02tG/jdfdRxJOP euON/JY3/HTd2Dt5Thfd4w== 0000950130-97-001698.txt : 19970416 0000950130-97-001698.hdr.sgml : 19970416 ACCESSION NUMBER: 0000950130-97-001698 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970414 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970415 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORGAN STANLEY GROUP INC /DE/ CENTRAL INDEX KEY: 0000789625 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211] IRS NUMBER: 132838811 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09085 FILM NUMBER: 97580455 BUSINESS ADDRESS: STREET 1: 1585 BROADWAY CITY: NEW YORK STATE: NY ZIP: 10036 BUSINESS PHONE: 2127034000 8-K 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): April 14, 1997 MORGAN STANLEY GROUP INC. (Exact name of registrant as specified in its charter) DELAWARE 1-9085 13-2838811 (STATE OR OTHER (COMMISSION (I.R.S. EMPLOYER JURISDICTION OF FILE NUMBER) IDENTIFICATION INCORPORATION) NUMBER) 1585 Broadway, New York, New York 10036 (Address of principal executive offices including zip code) Registrant's telephone number, including area code: (212) 761-4000 Item 5. OTHER EVENTS. As previously disclosed in Morgan Stanley Group Inc.'s ("Morgan Stanley") Current Report on Form 8-K dated February 28, 1997, Morgan Stanley and Dean Witter, Discover & Co. ("DWD") announced a definitive agreement to merge ("the Merger"). The transaction is intended to be accounted for as a pooling of interests and the new company will be named Morgan Stanley, Dean Witter, Discover & Co. Under the terms of the merger agreement, each of Morgan Stanley's common shares will be exchanged for 1.65 of DWD's common shares. The Merger, which is expected to be completed in mid-1997, is subject to customary closing conditions, including certain regulatory approvals and the approval of the stockholders of both companies. Attached and incorporated by reference herein as Exhibits 99.1 and 99.2, respectively, are certain financial information for DWD and unaudited pro forma combined financial information for the combined entity giving effect to the Merger. The pro forma combined financial information is being furnished solely to keep the Morgan Stanley Form S-3 filings current and the pro forma combined financial information will be updated as soon as first quarter DWD financial information becomes available. Item 7(c). Financial Statements, Pro Forma Financial Statements and Exhibits. Exhibit No. Description - ----------- ----------- 99.1 The unaudited consolidated income data of DWD for the three months ended December 31, 1996 and 1995 (incorporated by reference from page F-7 of Exhibit 99.1 of DWD's Current Report on Form 8-K dated January 22, 1997 (File no. 1-11758)). 99.2 The Morgan Stanley, Dean Witter, Discover & Co. unaudited pro forma condensed combined statement of financial condition at February 28, 1997, and unaudited pro forma condensed combined statements of income for the three months ended February 28, 1997 and February 29, 1996. SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. MORGAN STANLEY GROUP INC. Registrant Date: April 14, 1997 /s/ Eileen K. Murray . -------------------------------------------- Eileen K. Murray Treasurer and Chief Accounting Officer Index to Exhibits Exhibit No. Description - ----------- ----------- 99.1 The unaudited consolidated income data of DWD for the three months ended December 31, 1996 and 1995 (incorporated by reference from page F-7 of Exhibit 99.1 of DWD's Current Report on Form 8-K dated January 22, 1997 (File no. 1-11758)). 99.2 The Morgan Stanley, Dean Witter, Discover & Co. unaudited pro forma condensed combined statement of financial condition at February 28, 1997, and unaudited pro forma condensed combined statements of income for the three months ended February 28, 1997 and February 29, 1996. EX-99.1 2 UNAUDITED CONSOLIDATED STATEMENTS OF INCOME EXHIBIT 99.1 DEAN WITTER, DISCOVER & CO. Consolidated Income Data (in millions, except share data) (unaudited, GAAP basis) Three Months % Ended December 31, Increase 1996 1995 (Decrease) ----------- ----------- ----------- Merchant and cardmember fees $ 460.6 $ 343.6 34% Commissions 294.3 273.8 7% Asset management and admin. fees 299.3 258.6 16% Servicing fees 204.5 162.6 26% Principal transactions 108.9 111.1 (2%) Investment banking 78.1 48.8 60% Other 28.8 24.2 19% ----------- ----------- Total non-interest revenues 1,474.5 1,222.7 21% ----------- ----------- Interest revenue 968.9 905.0 7% Interest expense 405.4 402.8 1% ----------- ----------- Net interest income 563.5 502.2 12% Provision for losses on receivables 423.1 292.7 45% ----------- ----------- Net credit income 140.4 209.5 (33%) ----------- ----------- Net operating revenues 1,614.9 1,432.2 13% ----------- ----------- Employee compensation and benefits 559.2 496.9 13% Marketing and business development 253.6 224.0 13% Info. processing and communications 209.5 191.5 9% Facilities and equipment 67.4 61.9 9% Other 161.6 165.3 (2%) ----------- ----------- Total non-interest expenses 1,251.3 1,139.6 10% ----------- ----------- Income before income taxes 363.6 292.6 24% Income tax expense 135.8 114.5 19% ----------- ----------- Net income $ 227.8 $ 178.1 28% =========== =========== Primary net income per share (1) $ 0.68 $ 0.51 33% Primary avg common shares o/s (1) 334,280,968 351,746,068 Fully diluted net income per share (1) $ 0.68 $ 0.51 33% Fully diluted avg common shares o/s (1) 334,931,196 351,746,068 Oper exp as a % of net oper revenues 77.5% 79.6% Effective tax rate 37.3% 39.1% (1) All share and per share data have been restated for the two-for-one common stock split. F-7 EX-99.2 3 UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT EXHIBIT 99.2 UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS - MORGAN STANLEY, DEAN WITTER, DISCOVER & CO. The following unaudited pro forma condensed combined statement of financial condition combines the historical consolidated statement of financial condition of Morgan Stanley Group Inc. ("Morgan Stanley") and the historical consolidated balance sheet of Dean Witter, Discover & Co. ("DWD") giving effect to the Merger as though it had been consummated on February 28, 1997 after giving effect to the pro forma adjustments described in the notes to the pro forma condensed combined financial statements. The following unaudited pro forma condensed combined statements of income combine the historical consolidated statements of income of Morgan Stanley and DWD giving effect to the Merger, which is intended to be accounted for as a pooling of interests after giving effect to the pro forma adjustments described in the notes to the pro forma condensed combined financial statements. This information should be read in conjunction with the audited consolidated financial statements and other financial information contained in Morgan Stanley's Annual Report on Form 10-K for the fiscal year ended November 30, 1996 and the unaudited consolidated interim financial statements contained in Morgan Stanley's Quarterly Report on Form 10-Q for the period ended February 28, 1997, including the notes thereto, and the audited consolidated financial statements and other financial information contained in DWD's Annual Report on Form 10-K for the year ended December 31, 1996. These unaudited pro forma condensed combined financial statements are not necessarily indicative of the operating results and financial position that might have been achieved had the Merger occurred as of the beginning of the earliest period presented nor are they necessarily indicative of operating results and financial position which may occur in the future. MORGAN STANLEY, DEAN WITTER, DISCOVER & CO. UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF FINANCIAL CONDITION
Morgan Stanley DWD Historical Historical Pro Forma Pro Forma (Dollars in Millions) February 28, 1997 December 31, 1996 Adjustments (a) Combined ----------------- ----------------- ------------- ----------- Assets Cash and cash equivalents $4,488 $1,999 - $6,487 Cash and securities deposited with clearing organizations or segregated under federal and other regulations 1,490 2,045 - 3,535 Financial instruments owned: U.S. government and agency securities 15,219 951 - 16,170 Other sovereign government obligations 18,205 - - 18,205 Corporate and other debt 17,905 923 - 18,828 Corporate equities 14,242 40 - 14,282 Derivative contracts 12,818 - - 12,818 Physical commodities 287 - - 287 Securities purchased under agreements to resell 70,029 3,564 - 73,593 Securities borrowed 50,394 3,866 - 54,260 Receivables: Consumer loans (net of allowances of $815) - 22,373 - 22,373 Customers, net 10,368 2,839 - 13,207 Brokers, dealers and clearing organizations 1,995 - - 1,995 Fees, interest and other 2,524 805 - 3,329 Other assets 4,808 3,009 - 7,817 ---------------- ---------------- ------------- ----------- Total assets $224,772 $42,414 - $267,186 =============== =============== ============ ========== Liabilities and Stockholders' Equity Commercial paper and other short-term borrowings $22,241 $5,865 - $28,106 Deposits - 7,213 - 7,213 Financial instruments sold, not yet purchased: U.S. government and agency securities 13,991 1,199 - 15,190 Other sovereign government obligations 8,355 - - 8,355 Corporate and other debt 1,242 64 - 1,306 Corporate equities 8,762 11 - 8,773 Derivative contracts 11,006 - - 11,006 Physical commodities 36 - - 36 Securities sold under agreements to repurchase 95,919 3,567 - 99,486 Securities loaned 10,432 3,932 - 14,364 Payables: Customers 21,041 3,433 - 24,474 Brokers, dealers and clearing organizations 4,113 - - 4,113 Interest and dividends 1,244 200 - 1,444 Other liabilities and accrued expenses 2,425 3,622 - 6,047 Long-term borrowings 16,470 8,144 - 24,614 ---------------- ---------------- ------------- ----------- 217,277 37,250 - 254,527 ---------------- ---------------- ------------- ----------- Capital Units 999 - - 999 ---------------- ---------------- ------------- ----------- Commitments and contingencies Stockholders' equity: Preferred stock 1,027 - - 1,027 Common Stock(1) 164 3 ($161)(b) 6 Paid-in capital(1) 892 2,703 161 (b) 3,756 Retained earnings 4,767 2,973 (264)(b) 7,476 Cumulative translation adjustments (14) - - (14) ---------------- ---------------- ------------- ----------- Subtotal 6,836 5,679 (264) 12,251 ---------------- ---------------- ------------- ----------- Less: Stock compensation related deductions 76 (83) - (7) Common stock held in treasury, at cost 264 598 (264)(b) 598 ---------------- ---------------- ------------- ----------- Total stockholders' equity 6,496 5,164 0 11,660 ---------------- ---------------- ------------- ----------- ---------------- ---------------- ------------- ----------- Total liabilities and stockholders' equity $224,772 $42,414 $0 $267,186 =============== =============== ============ ==========
(1) DWD historical amounts have been adjusted to reflect a two-for-one stock split which became effective January 14, 1997. See Notes to the Unaudited Pro Forma Condensed Combined Financial Statements. MORGAN STANLEY, DEAN WITTER, DISCOVER & CO. UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
Morgan Stanley DWD Historical Historical Three Months Three Months Ended Ended Pro Forma (Dollars in Millions, Except Share Data) February 28, 1997 December 31, 1996 Combined (a) ----------------- ----------------- ---------------- Revenues: Investment banking $442 $78 $520 Principal transactions: Trading 751 109 860 Investments 56 - 56 Commissions 182 294 476 Merchant and cardmember fees - 461 461 Servicing fees - 204 204 Interest and dividends 2,367 969 3,336 Asset management and administration 278 299 577 Other - 29 29 ---------------- ---------------- ---------------- Total revenues 4,076 2,443 6,519 Interest expense 2,282 405 2,687 Provision for losses on credit receivables - 420 420 ---------------- ---------------- ---------------- Net revenues 1,794 1,618 3,412 ---------------- ---------------- ---------------- Expenses excluding interest: Compensation and benefits 879 559 1,438 Occupancy and equipment 62 67 129 Brokerage, clearing and exchange fees 84 10 94 Information processing and communications 78 199 277 Business development 59 254 313 Professional services 60 36 96 Other 62 129 191 ---------------- ---------------- ---------------- Total expenses excluding interest 1,284 1,254 2,538 ---------------- ---------------- ---------------- Income before income taxes 510 364 874 Provision for income taxes 194 136 330 ---------------- ---------------- ---------------- Net income $316 $228 $544 ---------------- ---------------- ---------------- Preferred stock dividend requirements $19 - $19 ---------------- ---------------- ---------------- Earnings applicable to common shares(1) $297 $228 $525 ---------------- ---------------- ---------------- Average common and common equivalent shares outstanding(1) (2) 158,307,567 334,280,968 595,488,454 (c) ---------------- ---------------- ---------------- Primary earnings per share(2) $1.88 $0.68 $0.88 (c) ---------------- ---------------- ---------------- Fully diluted earnings per share(2) $1.80 $0.68 $0.86 (c) ---------------- ---------------- ----------------
(1) Amounts shown are used to calculate primary earnings per share. (2) DWD historical share and per share amounts have been restated to reflect a two-for-one stock split which became effective January 14, 1997. See Notes to the Unaudited Pro Forma Condensed Combined Financial Statements. MORGAN STANLEY, DEAN WITTER, DISCOVER & CO. UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
Morgan Stanley DWD Historical Historical Three Months Three Months Ended Ended Pro Forma (Dollars in Millions, Except Share Data) February 29, 1996 December 31, 1995 Combined (a) ----------------- ----------------- ---------------- Revenues: Investment banking $399 $49 $448 Principal transactions: Trading 704 111 815 Investments (7) - (7) Commissions 154 274 428 Merchant and cardmember fees - 344 344 Servicing fees - 162 162 Interest and dividends 1,933 905 2,838 Asset management and administration 122 259 381 Other 3 24 27 ---------------- ---------------- ---------------- Total revenues 3,308 2,128 5,436 Interest expense 1,859 403 2,262 Provision for losses on credit receivables - 287 287 ---------------- ---------------- ---------------- Net revenues 1,449 1,438 2,887 ---------------- ---------------- ---------------- Expenses excluding interest: Compensation and benefits 705 497 1,202 Occupancy and equipment 58 62 120 Brokerage, clearing and exchange fees 66 10 76 Information processing and communications 61 181 242 Business development 37 224 261 Professional services 42 27 69 Other 40 144 184 ---------------- ---------------- ---------------- Total expenses excluding interest 1,009 1,145 2,154 ---------------- ---------------- ---------------- Income before income taxes 440 293 733 Provision for income taxes 167 115 282 ---------------- ---------------- ---------------- Net income $273 $178 $451 ---------------- ---------------- ---------------- Preferred stock dividend requirements $16 - $16 ---------------- ---------------- ---------------- Earnings applicable to common shares(1) $257 $178 $435 ---------------- ---------------- ---------------- Average common and common equivalent shares outstanding(1) (2) 156,549,243 351,746,068 610,052,319 (c) ---------------- ---------------- ---------------- Primary earnings per share(2) $1.64 $0.51 $0.71 (c) ---------------- ---------------- ---------------- Fully diluted earnings per share(2) $1.57 $0.51 $0.70 (c) ---------------- ---------------- ----------------
(1) Amounts shown are used to calculate primary earnings per share. (2) DWD historical share and per share amounts have been restated to reflect a two-for-one stock split which became effective January 14, 1997. See Notes to the Unaudited Pro Forma Condensed Combined Financial Statements. NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS NOTE (a): BASIS OF PRESENTATION The unaudited pro forma condensed combined statement of financial condition combines the historical consolidated statement of financial condition of Morgan Stanley at February 28, 1997 with the historical consolidated balance sheet of DWD at December 31, 1996. The unaudited pro forma condensed combined statements of income combine the historical consolidated statements of income of Morgan Stanley for the three months ended February 28, 1997 and February 29, 1996 with the historical consolidated statements of income of DWD for the three months ended December 31, 1996 and December 31, 1995. Certain amounts reflected in the historical financial statement presentations of both companies have been reclassified to conform to the unaudited pro forma condensed combined presentation. The unaudited pro forma condensed combined financial statements exclude (i) the effect of any potential changes in revenues or any operating synergies which may be achieved upon combining the resources of the companies (ii) investment banking, legal and miscellaneous transaction costs of the Merger, which will be reflected as an expense in the period the Merger is consummated, and (iii) costs associated with the integration and consolidation of the companies which are not presently estimable. Transactions between Morgan Stanley and DWD are not material in relation to the unaudited pro forma condensed combined financial statements and therefore, intercompany balances have not been eliminated from the pro forma combined amounts. Morgan Stanley and DWD are in the process of reviewing their respective accounting policies and do not expect there to be any significant adjustments necessary in order to conform such policies. During 1996, Morgan Stanley acquired Miller Anderson & Sherrerd, LLP and Van Kampen American Capital, Inc., both accounted for as purchase transactions. In April 1997, Morgan Stanley announced the acquisition of the institutional global custody business of Barclays PLC. In January 1997, DWD acquired Lombard Brokerage, Inc. which was accounted for as a purchase transaction. No pro forma effect has been given to these transactions as the effect is not material. NOTE (b): PRO FORMA ADJUSTMENTS The pro forma adjustments to common stock, paid in capital, and retained earnings at February 28, 1997 reflect (i) an exchange of 158.0 million shares of common stock, par value $1.00 per share of Morgan Stanley for 260.7 million shares (using the exchange ratio of 1.65) of common stock, par value $.01 per share of DWD and (ii) the cancellation and retirement of all shares of Morgan Stanley common stock held in treasury. The number of shares of DWD common stock to be issued at consummation of the Merger will be based upon the actual number of shares of Morgan Stanley common stock outstanding at that time. NOTE (c): PRO FORMA EARNINGS PER SHARE The pro forma combined primary and fully diluted earnings per common share for the respective periods presented is based on the combined weighted average number of common shares and share equivalents of Morgan Stanley and DWD. The number of common shares and share equivalents of Morgan Stanley is based on an exchange ratio of 1.65 shares of DWD common shares for each issued and outstanding share and share equivalent of Morgan Stanley. -----END PRIVACY-ENHANCED MESSAGE-----