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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
April 4, 2005 (March 31, 2005)
Date of Report (Date of earliest event reported)
Pitney Bowes Inc.
(Exact name of registrant as specified in its charter)
Delaware 1-3579 06-0495050
(State or other jurisdiction of (Commission file number) (I.R.S. Employer
incorporation or organization) Identification No.)
World Headquarters
1 Elmcroft Road
Stamford, Connecticut 06926-0700
(Address of principal executive offices)
(203) 356-5000
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT
On March 31, 2005, Pitney Bowes Credit Corporation ("Spinco"), a wholly-owned
subsidiary of Pitney Bowes Inc. (the "Registrant"), entered into a Subscription
Agreement (the "Agreement") with Cerberus Capital Management, L.P. through its
investment vehicle, JCC Management LLC (the "Investor"), in connection with the
Registrant's sponsored spin-off of its Capital Services external financing
business. At the time of the spin-off, Spinco will become a separate entity from
the consolidated group of the Registrant and become a publicly traded company.
Pursuant to the Agreement, the Investor subscribed to purchase shares of Spinco
common stock ("Tranche I Stock") for a purchase price of approximately $28.5
million and shares of Non-Voting Series A Convertible Preferred Stock ("Tranche
II Stock") for a purchase price of approximately $87.2 million, each subject to
purchase price adjustments. Upon the issuance of the Tranche II Stock, (i) the
Tranche I Stock will represent a 19.9% voting interest in Spinco and a 12.9%
economic interest of the then issued and outstanding shares of Spinco common
stock on a fully diluted basis (including taking into account the shares of
common stock to be issued upon conversion of the Tranche II Stock) and (ii) the
Tranche II Stock will represent an economic interest in Spinco of 35.1% of the
then issued and outstanding shares of Spinco common stock on a fully diluted
basis (including taking into account the shares of common stock to be issued
upon conversion of the Tranche II Stock). The Investor will have the right to
convert the Tranche II Stock at any time after the second anniversary of the
spin-off (the "Spin-Off Date"), at the election of the Investor into fully paid
and nonassessable shares of Spinco's common stock.
The Agreement anticipates that the Registrant's stockholders will receive 80.1%
of Spinco common stock in a tax-free distribution. The stock distribution ratio
and record and distribution dates will be determined just prior to the Spin-Off
Date. The transactions are not subject to a vote of the Registrant's
stockholders.
The consummation of the spin-off and the issuance of the Tranche I Stock and the
Tranche II Stock are expected to be completed by the end of 2005. These
transactions are subject to customary conditions, which include but are not
limited, to the following:
o obtaining a favorable ruling from the Internal Revenue Service that the
contributions and distributions contemplated under the Agreement and
ancillary agreements will qualify as tax-free contributions and
distributions; and
o a registration statement (with respect to Spinco common stock that is to be
distributed to the Registrant's stockholders) has been declared effective
by the Securities and Exchange Commission.
The securities to be issued to the Investor in accordance with the Agreement
will be issued pursuant to a private placement and will not be registered under
the Securities Act of 1933. The Investor will, however, have demand registration
rights and piggy-back registration rights with respect to the Tranche I Stock
and the shares of common stock to be issued upon conversion of the Tranche II
Stock. The Investor may exercise demand registration rights at any time after
the 20 month anniversary of the Spin-Off Date.
ITEM 2.05. COSTS ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES
The information contained in "Item 1.01 Entry into a Material Definitive
Agreement" of this current Report on Form 8-K is incorporated in this Item 2.05
by reference.
We estimate that we will incur after-tax transaction costs of about $20 million
to $35 million in connection with the spin-off. The majority of these costs will
be incurred at the time of the spin-off. These costs are composed primarily of
professional fees, taxes on asset transfers and lease contract termination fees.
In addition, in accordance with current accounting guidelines, at the time of
spin-off we will be required to compare the book and fair market values of the
assets and liabilities spun-off and record any resulting deficit as a charge in
discontinued operations. We currently estimate this potential non-cash after-tax
charge to be in the range of $150 million to $250 million. The ultimate amount
of this charge, if any, will be determined by the fair market value of Spinco at
the time of spin-off and the resolution of related tax liabilities.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
99.1 Press release of Pitney Bowes Inc. dated April 4, 2005
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Pitney Bowes Inc.
April 4, 2005
/s/ B.P. Nolop
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B.P. Nolop
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/ S.J. Green
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S.J. Green
Vice President - Finance and
Chief Accounting Officer
(Principal Accounting Officer)
EXHIBIT 99.1
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PITNEY BOWES TO SPIN OFF
CAPITAL SERVICES BUSINESS
Stamford, Conn., April 4, 2005 - Pitney Bowes Inc. (NYSE: PBI) today announced
that it has entered into a definitive agreement with Cerberus Capital
Management, L.P. for a sponsored spin-off of its Capital Services external
financing business. Under the terms of the agreement, Cerberus is expected to
invest in excess of $100 million for common and preferred stock representing up
to 19.9% of the voting interest and up to 48% economic interest in the spun-off
entity. The agreement anticipates that Pitney Bowes stockholders will receive
80.1% of the common stock of the new public company in a tax-free distribution.
Cerberus' investment will provide additional capital for the expansion of the
Capital Services business.
Capital Services provides commercial financing solutions for non-Pitney
Bowes equipment in three areas: Capital Equipment, Vendor Financing, and
Commercial Real Estate. At the end of 2004, the Company's Board of Directors
approved a plan to pursue a spin-off, contingent upon certain events including
reaching an acceptable agreement with an outside investor. The spun-off entity
will be an independent, publicly-traded company.
Michael J. Critelli, Chairman and CEO of Pitney Bowes Inc., noted, "We
believe that the successful spin-off of this operation will maximize shareholder
and customer value for both Pitney Bowes and Capital Services. Signing this
agreement is an important step in this process. The completed spin-off will give
both Pitney Bowes and Capital Services enhanced strategic focus and greater
flexibility to invest and respond to market opportunities."
The independent company will be led by Keith Williamson as Chief Executive
Officer, who is currently leading the transition of this operation to an
independent entity during the spin-off process. It will also benefit from a very
seasoned executive, sales and operational staff that has worked together for
more than a decade and has an average tenure of 25 years in the industry.
Mr. Williamson has over 16 years experience in the external financing
market and has headed the Capital Services business for Pitney Bowes since 1999.
He joined Pitney Bowes in 1988 and subsequently held a series of positions of
increasing responsibility in the company's tax, finance and legal operations,
including oversight of the treasury function and the rating agency activity
associated with the public debt of Pitney Bowes Credit Corporation. Mr.
Williamson was also General Counsel of Pitney Bowes Credit Corporation, and
President of Pitney Bowes Global Credit Services, which included the company's
captive finance operations. Ranked among FORTUNE Magazine's "50 Most Powerful
African American Executives", he received his B.A. from Brown University, his
J.D. and M.B.A. from Harvard University and his L.L.M. in taxation from New York
University Law School.
Mr. Williamson is the right person to lead the operation, according to Mr.
Critelli. "Keith Williamson brings exceptional credentials to the table,
including a wealth of experience in complex external finance transactions,
extensive legal and tax knowledge, and solid business judgment. He is an
outstanding and respected leader of a team of seasoned professionals that he has
led for many years. Together, they will look to deliver customer and shareholder
value through the new entity."
The spun-off entity will include approximately $2 billion in external
finance assets. According to Mr. Williamson, "As a specialty finance company, we
will focus on assets, structures and markets where we have strong expertise. We
will continue to employ a disciplined approach to credit and underwriting, which
is the foundation on which our history of controlled growth and quality
portfolio management has been built."
The contribution of these operations to the company's full-year 2004
performance included: $127 million of revenue, $79 million of EBIT, $0.14 of
diluted earnings per share and $143 million of cash from operations.
The transaction is not subject to a vote of Pitney Bowes shareholders. The
stock distribution ratio and record and distribution dates will be determined
just prior to the spin date. The transaction is expected to be completed by the
end of 2005, subject to a favorable ruling from the Internal Revenue Service
that the transaction will be tax-free, regulatory review and other customary
conditions.
Pitney Bowes was advised on this transaction by JPMorgan and Cerberus was
advised by Lehman Brothers and IXIS Capital Markets North America.
Headquartered in New York, Cerberus Capital Management, L.P. and its
affiliated entities manage funds and accounts with capital in excess of $15
billion.
Pitney Bowes is the world's leading provider of integrated mail and
document management systems, services and solutions. The $5 billion company
helps organizations of all sizes efficiently and effectively manage their
mission-critical mail and document flow in physical, digital and hybrid formats.
Its solutions range from addressing software and metering systems to print
stream management, electronic bill presentment and presort mail services. The
company's 80-plus years of technological leadership have produced many major
innovations in the mailing industry, and it is consistently on the Intellectual
Property Owner's list of top U.S. patent holders. With approximately 35,000
employees worldwide, Pitney Bowes serves more than 2 million businesses through
direct and dealer operations. Visit www.pb.com/pbcs for more information on
Capital Services. More information on the company can be found at www.pb.com.
Certain information contained in this press release constitutes
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements are inherently
uncertain and involve risks. Consequently, actual results may differ materially
from those indicated by the forward-looking statements. Statements made herein
that may be considered forward looking include statements concerning the
tax-free nature of the distribution of Pitney Bowes Capital Service's common
stock to Pitney Bowes' stockholders and the anticipated investment by Cerberus
Capital Management, L.P. A variety of risks and uncertainties could cause Pitney
Bowes actual results to differ materially from the anticipated results or other
expectations expressed in the Pitney Bowes forward looking statements. The risks
and uncertainties include, without limitation of the following: (a) underlying
assumptions or expectations related to the spin-off transaction proving to be
inaccurate or unrealized; (b) the timing of the Securities and Exchange
Commission's review of Pitney Bowes Capital Service's registration statement;
and (c) the uncertainty of general business and economic conditions. Additional
factors related to these and other expectations are more fully outlined in
Pitney Bowes 2004 Form 10-K Annual Report filed with the Securities and Exchange
Commission. In addition, the forward-looking statements are subject to change
based on the timing and specific terms of the spin-off.