Walter Industries (WLT : NYSE) to spin-off financing businessTampa Bay Business Journal
Walter Industries restructures, closes offices
Walter Industries Inc.’s financing subsidiary, JWH Holding Co., is merging with Hanover Capital Mortgage Holdings Inc. to create a company based in Tampa that will employ 225 people.
Walter Industries Chairman Michael T. Tokarz called the planned spin-off of JWH Holding Co. “a momentous step” forward for the company in transforming itself into primarily a natural resources and energy company.
In addition, the merger with Hanover, a real estate investment trust based in New Jersey, means the Walter residential mortgage portfolio will no longer be reliant on the capital markets for its success, according to a written statement from the company.
JWH and Hanover (AMEX: HCM) will be renamed Walter Investment Management Corp. The new company is expected to trade on the American Stock Exchange.
Mark J. O’Brien, chairman and CEO of JWH, will hold the same positions in Walter Investment Management following the merger. Charles E. Cauthen, who is now president of Walter Mortgage Co., will become president and chief operating officer of the new company.
Walter Industries’ directors will designate six directors, including Tokarz and O'Brien, to Walter Investment Management’s board, and Hanover will designate one.
JWH is presently the parent company of Walter Mortgage Co. and Jim Walter Homes. Jim Walter Homes will be separated from JWH and not part of the deal.
The merger is expected to be completed in early 2009. The transaction is anticipated to occur in three steps: The first, a spin-off of JWH Holding Co., is expected to be a tax-free stock distribution to Walter Industries' shareholders. The second step will be a taxable distribution of stock and cash from JWH to its shareholders, and the third step would be a merger between JWH and Hanover.
The taxable distribution is required to comply with Internal Revenue Service requirements for REITs. After the spin-off, taxable distribution and merger, Walter Industries shareholders will own about 98.5 percent of Walter Investment Management’s publicly traded common stock. Hanover’s shareholders will own the remaining 1.5 percent.
Hanover’s shareholders must approve the merger, which also requires favorable rulings from the Internal Revenue Service as well as the Securities and Exchange Commission.