WILMINGTON, Del. -- Household International Inc., the nation's second largest consumer lender, agreed yesterday to buy Beneficial Corp. for about $8.25 billion in stock as mergers sweep the finance business.
Household, based in Prospect Heights, Ill., will pay 1.0222 shares, or $143.87, for each Beneficial share. After the purchase, Household will have 30 million customers, $62 billion of receivables and more than 2,000 branches across the United States as well as in Britain, Ireland and Canada.
Beneficial, a Wilmington-based consumer loan and credit card company, put itself up for sale in February, as Chairman and Chief Executive Officer Finn Caspersen admitted that he couldn't compete with faster-growing rivals. Its stock surged 66 percent this year, in anticipation of the sale, making the acquisition expensive for Household, investors said.
"Beneficial is definitely extracting its pound of flesh," said Mark Dawson, a senior portfolio manager at Rainier Investment Management, which owns about 550,000 Household shares. Still, he said, "there is a great overlap and that will give them the opportunity to close a lot of offices, get a greater geographic reach and consolidate their operations."
Shares of Household fell $6 to $140.75 yesterday while Beneficial gained $7.4375 to $137.9375.
Household, along with dozens of other financial companies, is buying rivals to increase profits.
Household expects to cut about $450 million in annual costs by closing branch offices and cutting duplication in computer and clerical positions. The company plans to take a $1 billion charge to pay for the cost cuts after the purchase is completed, probably in the third quarter of the year. The acquisition should start adding to Household's earnings in 1999. The company, No. 2 in consumer finance after Associates First Capital Corp., will shut between 200 and 300 branches, according to William Aldinger, Household's chairman and chief executive officer. He said he doesn't yet know how many workers will lose jobs.
Aldinger will remain CEO after the merger. Caspersen will be chairman.
Household is known for buying rivals and eliminating overlap.
"These guys are slash-and-burn," said E. Reilly Tierney, an analyst at Fox-Pitt Kelton Inc. "That's how they make it work, by just shutting down everything that doesn't make sense."
Pub Date: 4/08/98