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):
May 1, 2001
STILWELL FINANCIAL INC.
(Exact name of company as specified in its charter)
DELAWARE 001-15253 43-1804048
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(State or other jurisdiction (Commission file (IRS Employer
of incorporation) number) Identification Number)
920 Main Street, 21st Floor, Kansas City, Missouri 64105
(Address of principal executive offices) (Zip Code)
Company's telephone number, including area code:
(816) 218 - 2400
Not Applicable
(Former name or former address if changed since last report)
Item 2. Acquisition or Disposition of Assets
During the first five months of 2001, Stilwell Financial Inc.
("Stilwell"; the "Company") purchased 802,042 shares of Janus Capital
Corporation ("Janus") common stock from several Janus minority stockholders at a
total cost of approximately $806 million. Stilwell funded these acquisitions
through a combination of cash, borrowings under existing credit facilities and
the issuance of zero-coupon convertible debt securities. The details of these
transactions follow.
Acquisition from minority stockholders other than Thomas H. Bailey
During March and April 2001, Stilwell acquired 202,042 shares of Janus
common stock from several minority stockholders. Approximately 163,900 of these
shares were acquired by certain Janus employees in 1995 when Janus stock
ownership was first extended to a broader group of key management employees
other than Mr. Thomas H. Bailey, Janus's Chairman, President and Chief Executive
Officer. The remainder of the shares had been held since 1984 or before.
Stilwell purchased the shares through the exercise of put rights, virtually
eliminating all mandatory put rights to Stilwell except for those on remaining
shares held by Mr. Bailey.
The purchase price for these shares totaled approximately $203 million,
which was funded through cash and borrowings under the Company's credit
facilities. In connection with the transactions, amounts owed to Stilwell by
certain of the selling minority stockholders were repaid (see information in
Note 10 to the consolidated financial statements under Part II Item 8, Financial
Statements and Supplementary Data, of the Company's Annual Report on Form 10-K
for the year ended December 31, 2000).
Acquisition from Thomas H. Bailey
On May 1, 2001, Stilwell purchased 600,000 shares of Janus common stock
from Mr. Bailey. The purchase price of the shares totaled approximately $603
million. In addition, Stilwell paid to Mr. Bailey approximately $7 million
representing interest expense that began to accrue on the unpaid purchase price
30 days after Stilwell received notice of Mr. Bailey's decision to exercise his
put right. Stilwell funded the purchase price and associated interest with
proceeds received in connection with its zero-coupon convertible debt offering
(see below).
Net effect of Acquisitions
Stilwell accounted for these transactions using the purchase method of
accounting. Based on initial estimates, the purchase price exceeded the fair
value of the net tangible assets acquired by approximately $796 million and this
excess was recorded as identified intangible assets and goodwill to be amortized
over a period of 20 years. The Company expects to have an independent valuation
completed in order to determine the actual allocation of purchase price for the
shares acquired, which will affect the levels of goodwill and other intangibles,
as well as the periods over which these assets will be amortized. In addition,
the Financial Accounting Standards Board recently adopted Statement of Financial
Accounting Standards No. 142 "Goodwill and Other Intangible Assets" ("FAS 142"),
which establishes new standards for recording and amortizing goodwill and
identifiable intangible assets. All of the provisions of FAS 142 are required to
be applied in fiscal years beginning after December 15, 2001 to all goodwill and
other intangible assets recognized in an entity's statement of financial
position at that date, regardless of when those assets were initially
recognized. The adoption by Stilwell of FAS 142 - expected to occur on January
1, 2002 - will impact the amount of amortization expense recorded in the
Statement of Income.
With the closing of these transactions, Stilwell's ownership stake in
Janus has increased to approximately 90.3%. Mr. Bailey continues to hold
approximately 6.2% of the Janus common stock and more than 150 other Janus
employees own approximately 3.5%.
2
Issuance of zero-coupon convertible debt securities
On April 30, 2001, Stilwell completed an offering of approximately $931
million principal amount at maturity of zero-coupon convertible senior notes due
April 30, 2031. The convertible securities were offered only to qualified
institutional buyers at an initial offering price of $741.37 per $1,000
principal amount at maturity, resulting in gross proceeds to Stilwell of
approximately $690 million (prior to consideration of approximately $15.5
million in debt issuance costs). The total gross proceeds received include
approximately $90 million from the exercise of an over-allotment option by the
underwriter. The issue price represents a yield to maturity of 1% per year.
Additionally, to the extent that Stilwell's average common stock price exceeds
certain thresholds, Stilwell could be required to pay contingent interest at a
rate of the greater of Stilwell's regular quarterly cash dividend or 0.0625% of
the average market price of the security over a specified time period.
Each $1,000 principal amount at maturity of the convertible securities
will initially be convertible into 17.1544 shares of common stock upon the
occurrence of any of the following events: i) if the closing prices of
Stilwell's shares of common stock on the New York Stock Exchange exceed
specified levels; ii) if, after the date on which the convertible securities
have been assigned a credit rating, the credit rating assigned is below a
specified level; iii) if Stilwell calls the convertible securities for
redemption; or iv) in the event that Stilwell takes certain corporate actions,
such as declaration of an extraordinary dividend. Stilwell may redeem the
convertible securities for cash on or after April 30, 2006 at their accreted
value. Stilwell also may be required to repurchase the convertible securities at
the accreted value thereof, at the option of the holders on April 30, 2002,
2004, 2006, 2011, 2016, 2021 and 2026. Stilwell may choose to pay the purchase
price for such repurchases in cash or shares of Stilwell common stock.
The proceeds received from the offering were used to purchase 600,000
shares of Janus common stock and to pay associated interest to Mr. Bailey as
discussed above. Any proceeds remaining (after payment of debt issuance costs)
are available for general corporate purposes.
Summary
Stilwell disclosed the acquisition of Janus common stock from Mr.
Bailey in Item 5, Other Information, as part of the March 31, 2001 Form 10-Q.
The acquisitions from the other minority stockholders and the issuance of the
zero-coupon convertible debt securities were disclosed in the Notes to the
Consolidated Condensed Financial Statements included in the March 31, 2001 Form
10-Q. Included as Item 7 herein are the pro forma financial statements
associated with these transactions. Because it was impracticable to file such
required pro forma financial statements at the time of initial disclosure,
Stilwell is hereby filing the pro forma financial statements within 60 days
after the date of filing its notice of the acquisition pursuant to regulations
set forth by the Securities and Exchange Commission.
Item 7. Financial Statements and Exhibits
(b) Pro forma financial information
Exhibit No. Document
(99) Additional Exhibits
99.1 Introductory Comments to Unaudited Pro
Forma Financial Information, is attached
as Exhibit 99.1
99.2 Unaudited Pro Forma Consolidated
Condensed Balance Sheet at March 31,
2001, is attached hereto as Exhibit 99.2
99.3 Unaudited Pro Forma Consolidated
Condensed Statement of Income for the
year ended December 31, 2000, is
attached hereto as Exhibit 99.3
99.4 Unaudited Pro Forma Consolidated
Condensed Statement of Income for the
three months ended March 31, 2001,
is attached hereto as Exhibit 99.4
99.5 Notes to Unaudited Pro Forma
Consolidated Condensed Financial
Statements, is attached hereto as
Exhibit 99.5
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this Report to be signed on its behalf by the undersigned
hereunto duly authorized.
Stilwell Financial Inc.
Date: July 13, 2001 By: /s/ Douglas E. Nickerson
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Douglas E. Nickerson
Vice President and Controller
(Principal Accounting Officer)