CHICAGO, Dec. 17 /PRNewswire/ -- Alleghany Corporation ("Alleghany")
(NYSE: Y) announced today that it intends to establish the title insurance and
real estate related services businesses conducted by its wholly owned
subsidiary, Chicago Title and Trust Company ("CT&T"), as an independent,
publicly traded company through a spin-off to Alleghany stockholders.
The spin-off will be effected through a pro rata distribution to
Alleghany's stockholders of shares of a newly formed holding company for CT&T.
The distribution is expected to be on a tax-free basis. The asset management
business conducted through CT&T's subsidiary, Alleghany Asset Management, Inc.
("AAM"), will not be part of the distribution and will remain with Alleghany.
On a pro forma basis, the title insurance and real estate related services
businesses which will be included in the new public company had pre-tax
earnings of $55.4 million on revenues of $1.0 billion for the first nine
months of 1997, compared with $66.3 million on revenues of $ 1.3 billion for
the full year 1996. For the year ended December 31, 1997, CT&T estimates that
its after-tax earnings, exclusive of the units that will be retained by
Alleghany, will be in excess of $50 million. CT&T is the nation's largest
title insurance underwriter, with offices and agencies throughout the country.
It has approximately 400 direct offices, over 7,800 employees, and
relationships with over 3,500 agencies. It insures over one million mortgages
annually, including new homes, existing homes, first and second mortgages, and
many of the country's commercial and industrial buildings.
The planned transaction is subject to market conditions, to receipt of a
favorable ruling from the Internal Revenue Service and to receipt of any
required regulatory approvals. The spin-off is expected to be in the late
first quarter or the second quarter of 1998. The new holding company will
apply for listing on the New York Stock Exchange.
John J. Burns, Jr., President and chief executive officer of Alleghany,
said: "The title insurance industry is undergoing a period of consolidation
and rapid change. Establishment of CT&T's title insurance business as an
independent company will enhance its ability to focus on operating
efficiencies and strategic initiatives required to respond to a changing
marketplace. Moreover, in the current competitive environment, it is more
important than ever to foster development of an entrepreneurial culture at
CT&T. As an independent public company, CT&T will be able to provide equity
based compensation and incentives that should be both attractive and
appropriate for the retention and recruitment of senior management and the
motivation of employees throughout the organization. After the distribution,
CT&T will continue under its current management with an independent board.
John Rau, the current President and Chief Executive Officer of CT&T, will
continue in that role, reporting to the CT&T Board. While the Board's final
makeup is yet to be determined, we believe that it will consist of many of the
current CT&T directors, joined by some new directors appropriate to its
position as a major Chicago-headquartered company."
Rau, who joined CT&T as President and Chief Executive Officer in late
1996, had previously served as CEO of Exchange National Bank, an independent
public company, from 1983 to 1989, and then as CEO of LaSalle National Bank
after its 1989 merger with Exchange. Rau said, "This is the dawning of an
exciting new era for CT&T, the nation's oldest and finest real estate services
firm. Alleghany has supported CT&T throughout its tenure and invested heavily
in our growth by acquisition and development of industry-leading systems.
Alleghany has now committed to provide a meaningful ownership interest to our
managers and the opportunity for all employees to become owners and
participate directly in future increases in shareholder value. This is both
an act of high confidence in our organization and insightful recognition of
the best way to keep CT&T the leader in its field."
Alleghany said that all final decisions about the awarding of equity, and
option opportunities for CT&T's employees would be disclosed in appropriate
public filings after requisite Board approval. Burns further commented, "It
is our preliminary intent, immediately upon the distribution, to grant stock
and option awards to employees in respect of about 7% of the new holding
company stock. As a current 100% shareholder, we believe that whatever
initial dilution results from distributing some of the equity to our
exceptional employee group will be recovered many times over by the effect of
their having both an ownership mindset and a real ownership stake."
CT&T, headquartered in Chicago, is engaged in the sale and underwriting of
title insurance and real estate related services (including credit, flood,
property evaluation, escrow and closing services). CT&T was acquired by
Alleghany in June 1985. With consolidated assets of approximately $4.9
billion as of September 30, 1997, Alleghany is engaged, in addition to the
title insurance and real estate related services businesses conducted by CT&T,
in the reinsurance, industrial minerals and asset management businesses
conducted by its subsidiaries Underwriters Re Group Inc., World Minerals Inc.,
and AAM (which, as described above, is currently a subsidiary of CT&T but will
remain with Alleghany). Alleghany also operates a steel fastener importing
business through its Heads and Threads division.
Year ended 1996 (unaudited, $ in millions)
Historical Pro Forma
Alleghany
New (without New
CT Holding CT Holding
Alleghany CT&T Company Co. and
(incl. CT&T (incl. AAM) AAM (CT&T incl. AAM)
and AAM) without AAM)
Revenues $2,062.2 $1,381.0 $56.8 $1,324.2 $738.0
Total costs
and expenses 1,935.1 1,301.6 43.7 1,257.9 677.2
Pre-tax
earnings $127.1 $79.4 $13.1 $66.3 $60.8
Net income $87.0 $52.0 $7.8 $44.2 $42.8
Total
book value $1,423.3 $360.6* $19.3 $341.3 $1,082.0
Nine months ended September 30, 1997 (unaudited, $ in millions)
Historical Pro Forma
Alleghany
New (without New
CT Holding CT Holding
Alleghany CT&T Company Co. and
(incl. CT&T (incl. AAM) AAM (CT&T incl. AAM)
and AAM) without AAM)
Revenues $1,629.2 $1,088.3 $57.2 $1,031.1 $598.1
Total costs
and expenses 1,517.3 1,015.7 40.0 975.7 541.6
Pre-tax earnings $111.9 $72.6 $17.2 $55.4 $56.5
Net income $76.9 $47.9 $10.7 $37.2 $39.7
Total book
value $1,539.7 $414.3* $22.2 $392.1 $1,147.6
* 1996 figure reflects the payment by CT&T of a $30.0 million cash
dividend to Alleghany in December 1996.
A cash dividend is scheduled to be paid by CT&T to Alleghany in
December 1997 in the amount of $32.1 million.
Alleghany expects that the New CT Holding Company will pay cash
dividends to its stockholders consistent with CT&T's past practice.
Other information at 9/30/97:
CT&T full-time employees
(excluding AAM) 7,846
CT&T policy-issuing agents 3,886
CT&T full-service offices 400
Assets under management
by AAM as of:
12/31/96 $14.5 billion
9/30/97 $21.3 billion 17-Dec-97
SOURCE Chicago Title and Trust Company
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Related links:
http://www.ctt.com
CONTACT:
Barbara J. Harms of Chicago Title & Trust,
312-223-2461
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