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Primerica Announces Sales of Insurance Companies, Musicland

April 11, 1988

GREENWICH, Conn. (AP) _ Primerica Corp. has agreed to sell Musicland Group Inc. and three of its insurance subsidiaries in deals expected to net it about $700 million, the company announced Monday

The Greenwich-based company said it signed a definitive agreement to sell Musicland for about $410 million in a leveraged buyout to an investor group that included senior members of the business’s management.

Primerica also agreed to sell three of its insurance subsidiaries and affiliated marketing and management companies to American National Insurance Co. of Galveston, Texas, for about $235 million, but will incur a one-time loss of about $49 million on the sale.

Musicland is the nation’s largest specialty retailer of prerecorded music and video home entertainment products.

The sales of the insurance businesses and Musicland are part of Primerica’s previously announced strategy of simplifying its operations and strengthening its financial position.

Gerald Tsai Jr., Primerica chairman, chief executive officer and president, said the proceeds from the sales would be used to reduce debt.

During the past four months, Primerica stated, it has completed or announced transactions that together are anticipated to result in gross proceeds to the company of about $860 million.

″We will continue to focus on the sale of other non-strategic assets,″ Tsai said Monday.

Primerica said it expected to complete the Musicland sale in the second quarter of 1988.

A one-time, after-tax gain of $130 million was anticipated as a result of the leveraged buyout of Musicland by an investor group headed by Donaldson, Lufkin and Jenrette and Musicland’s senior management, Primerica said in a statement.

Primerica said it expects to participate in the leveraged buyout by purchasing up to 20 percent of the company’s common stock for $10 million and $8 million worth of preferred stock.

The transaction is subject to approval by Musicland shareholders.

As of Dec. 31, 1987, Musicland operated 616 stores in 47 states under the names Musicland, Sam Goody and Discount Records. Its 1987 revenue was $510.5 million.

In the insurance deal, American National will buy Pennsylvania Life Insurance Co., Executive Fund Life Insurance Co., and Trans Pacific Life Insurance Co. and affiliated companies for the businesses’ book value on the closing date plus additional consideration of up to $4.8 million.

Primerica estimated that the book value of the businesses, computed before dividends and other actions that may be taken as part of the transaction, is about $235 million.

Primerica said it expects to incur a one-time, after-tax loss of about $49 million on the transaction, principally due to the difference between the tax and book bases of the companies resulting from their tax-free acquisition in 1983.

The sale of Pennsylvania Life is subject to the approval of the boards of Primerica and American National, as well as regulatory approvals. Primerica acquired the businesses to be sold to American National when it bought Penncorp Financial Inc. in January 1983.

American National has $4.1 billion in assets and more than $28 billion of life insurance in force.

Primerica, the former American Can, is engaged in financial services and specialty retailing.

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