Exhibit 7(c)
FOR IMMEDIATE RELEASE
Contact: Media - Gary Sullivan
(212) 969-1316
(203) 348-7649 (home)
gary_sullivan@acml.com (e-mail)
Investors - Anne Drennan
(212) 969-6443
ALLIANCE CAPITAL MANAGEMENT L.P. ANNOUNCES
PROPOSED CHANGE IN OWNERSHIP STRUCTURE IN RESPONSE TO
POSSIBLE PARTNERSHIP TAX STATUS EXPIRATION;
TAKES NON-CASH WRITE-DOWN FOR CURSITOR INVESTMENT
New York, N.Y., June 24, 1997 -- To address a possible year-end change in the
tax status of certain publicly traded partnerships, Alliance Capital
Management L.P. (NYSE: AC) (Alliance) today announced plans for a new
ownership structure whereby Unitholders may exchange their existing Units for
publicly traded common stock in a new corporation, Alliance Capital Management
Corporation II (ACMC II).
Following the exchange, ACMC II will own the partnership interests of
exchanging Unitholders and will receive its pro rata share of Alliance's
earnings and distributions. Alliance currently expects its distribution policy
will remain unchanged and that ACMC II will pay substantially all of its pro
rata distributions, less income taxes, as dividends to its common stockholders.
Alliance noted that it will not proceed with the proposed plans if,
during the year, it determines that changes in federal tax law would make it
preferable for Alliance to retain its current ownership form. Tax bills under
Congressional consideration provide for permanent partnership tax status for
certain publicly traded partnerships, including Alliance, but would subject
those partnerships to a new excise tax on gross income.
Dave H. Williams, Chairman and Chief Executive Officer, said, "If a
change in Alliance's partnership tax status is necessary, the proposed new
structure will enable Unitholders to continue participating in our growth
while offering a more attractive form of ownership for potential new
institutional investors."
Alliance's 1996 net income and distributions were $2.27 and $2.19 per
unit, respectively. On a pro forma basis, ACMC II's 1996 net income and
dividends would have been an estimated $1.23 and $1.30 per share, respectively.
Under the plan for a new ownership structure, Alliance Unitholders may
contribute their Units in a tax-free exchange for an equal number of shares of
ACMC II Class A common stock. Application will be made to list the Class A
common stock on the New York Stock Exchange. Following the transaction, the
Alliance partnership Units will be subject to severe restrictions on
transferability and Alliance will become a private limited partnership,
preserving its partnership tax status. In addition, The Equitable Life
Assurance Society of the United States (Equitable), a wholly owned subsidiary
of the Equitable Companies Incorporated (NYSE: EQ), is considering a cash
alternative in the transaction to allow Unitholders to sell their Units to
Equitable. The total cash amount in the transaction would be limited to
approximately $300 million or a lesser amount in order to preserve an adequate
float in the Class A Shares following the transaction. Equitable has not yet
finally determined whether to include a cash alternative in the transaction,
the amount thereof or the price per Unit it would offer to Unitholders.
Equitable owns approximately 57% of Alliance's Units and, through its
wholly owned subsidiary Alliance Capital Management Corporation (ACMC), a 1%
general partnership interest in Alliance. Equitable has advised Alliance that
it intends to vote in favor of the plan and that it will elect to retain
its limited partnership interest in Alliance. As part of the conversion,
ACMC will contribute its 1% general partnership interest in Alliance to
ACMC II in exchange for Class B common stock and ACMC II will replace ACMC
as the General Partner of Alliance. The Class B common stock voting rights
will maintain Equitable's controlling interest in the General Partner.
Shares of ACMC II's Class A common stock will be freely transferable as
a publicly traded equity security, and shareholders will receive dividends
paid out of ACMC II's after-tax income. Although ACMC II's income will be
subject to federal, state and local income taxes, ACMC II expects these taxes
will be reduced by amortization deductions over a 15-year term and will
approximate 36% to 40% of pre-tax income in 1998.
Unitholders electing to keep their Units will retain their current
status with respect to Alliance's earnings and distributions. However,
limited partnership Units after the conversion will not be transferable except
under very limited circumstances.
The proposed change in ownership structure is subject to customary
regulatory approvals, final approval of the Board of Directors of Alliance's
General Partner and the approval of a majority of Alliance's limited partners
and certain other conditions. If adopted, the change in ownership structure
is expected to become effective in December 1997 and Alliance will declare its
fourth quarter 1997 distribution in December to Unitholders of record just
prior to closing.
Alliance also announced that a non-recurring non-cash charge of $121
million, or $1.40 per Unit, would be taken in the quarter ending June 30,
1997, to reduce the recorded value of goodwill and contracts associated with
Alliance's acquisition of Cursitor Holdings, L.P. and Cursitor Holdings
Limited. The non-recurring non-cash charge reflects Alliance's current view
that Cursitor's continuing decline in assets under management and its reduced
profitability, resulting from relative investment underperformance, no longer
support the carrying value of its investment. Cursitor's assets under
management have declined from $10.1 billion at the date of acquisition to
$5.3 billion as of May 31, 1997. Cursitor specializes in providing global
asset allocation services to institutional investors, representing less
than 3% of Alliance's assets under management. Alliance noted the non-cash
charge will not affect operating income or distributions per Unit.
Mr. Williams noted, "The non-cash charge will ensure that the book value
of this subsidiary is fairly represented to Unitholders and potential
shareholders in the new corporation, based on our view at this time. Because
of our strong capital base and solid operating earnings, we do not believe
this non-recurring charge will significantly affect the continued profitable
growth of our business. "
Based on current market conditions, Alliance expects to report second
quarter 1997 operating income (excluding the writedown of intangibles) of
$0.66 per Unit, an increase of approximately 20% from second quarter 1996 net
income. The second quarter 1997 net loss (inclusive of the writedown of
intangibles) is expected to be $(0.74) per Unit. For the full year 1997,
based on current market conditions, Alliance expects operating income per unit
to be in the range of $2.68 to $2.73 , an increase of approximately 19% over
full year 1996 net income. The full year 1997 net income, including the
writedown of intangibles and costs associated with the proposed restructuring,
is estimated within the range of $1.17 to $1.22 per Unit.
In line with these estimates, Alliance expects to declare a second
quarter distribution of $0.64 per Unit as compared to $0.55 and $0.60 per Unit
for the quarters ended June 30, 1996 and March 31, 1997 respectively. Full
year 1997 distributions are estimated to be in the range of $2.60 to $2.65 per
Unit, versus $2.19 for full year 1996.
Certain statements contained in this press release are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 and are thus prospective. Such forward-looking statements are subject
to risks, uncertainties and other factors, the most significant of which
include: the effect of general public securities market conditions and
investment performance on the value of assets under management, fluctuations
in the number of accounts and amount of assets under management, competition
and changes in Alliance's regulatory environment. Such risks, uncertainties
and other factors could cause actual results to differ materially from future
-Continued-
results expressed or implied by such forward-looking statements. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business" in Alliance's Annual Report on Form 10-K for the
year ended December 31, 1996.
Worldwide, Alliance has $194 billion under management as of May 31,
1997, a 7% increase since the end of the first quarter of 1997. Alliance
Capital, one of the largest publicly traded asset managers, manages
retirement assets for many of the largest public and private employee
benefit plans including 31 of the nation's Fortune 100 companies, public
employee retirement funds in 33 states, as well as managing assets for
foundations, endowments, banks and insurance companies. Alliance Capital
is also one of America's largest mutual fund sponsors, with nearly three
million shareholder accounts investing through the firm's diverse family of
fund portfolios.
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