Travelers 2003 Annual Report Download - page 15

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13
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
Note 1 — Basis of Pro Forma Presentation
On April 1, 2004, Travelers Property Casualty Corp. (“TPC”) merged with a subsidiary of The St. Paul Companies,
Inc. (“SPC”), as a result of which TPC has become a wholly owned subsidiary of SPC, now known as The St. Paul
Travelers Companies, Inc. (together with its subsidiaries, “St. Paul Travelers”). Each share of TPC class A and class B
common stock was exchanged for 0.4334 of a share of St. Paul Travelers common stock. Share and per share amounts
for all periods presented have been restated to reflect the exchange of TPC common stock for St. Paul Travelers
common stock. For accounting purposes, this transaction will be accounted for as a reverse acquisition with TPC
treated as the accounting acquirer. Accordingly, the transaction will be accounted for as a purchase business
combination, using TPC’s historical financial information and applying fair value estimates to the acquired assets,
liabilities and commitments of SPC as of April 1, 2004.
The preliminary Unaudited Pro Forma Condensed Combined Balance Sheet as of December 31, 2003 reflects the
merger as if it occurred on December 31, 2003. The preliminary Unaudited Pro Forma Condensed Combined Income
Statement for the year ended December 31, 2003 reflects the merger as if it occurred on January 1, 2003. The pro
forma adjustments herein reflect an exchange ratio of 0.4334 of a share of SPC common stock for each of the 505.7
million shares of TPC class A common stock outstanding and of the 499.8 million shares of TPC class B common
stock outstanding at December 31, 2003.
The stock price used in determining the preliminary estimated purchase price is based on an average of the closing
price of SPC common stock for the two trading days before through the two trading days after November 17, 2003, the
day SPC and TPC announced their merger agreement. The preliminary estimated purchase price also includes the fair
value of the SPC stock options, the fair value adjustment to SPC’s preferred stock and other costs of the transaction,
and is calculated as follows:
Number of shares of SPC common stock outstanding as of December 31, 2003 (in
thousands) 228,393
SPC’s average stock price for the two trading days before through the two trading days after
November 17, 2003, the day SPC and TPC announced their merger agreement $ 36.86
Estimated fair value of SPC’s common stock outstanding as of December 31, 2003 (in
millions) $ 8,419
Estimated fair value of 20.7 million SPC stock options outstanding as of December 31,
2003 (in millions) 160
Estimated excess of fair value over book value of SPC’s convertible preferred stock
outstanding, net of the excess of the fair value over the book value of the related guaranteed
obligation, as of December 31, 2003 (in millions) 101
Estimated transaction costs of TPC (in millions) 15
Estimated purchase price (in millions) $ 8,695
The preliminary estimated purchase price has been allocated as follows based upon purchase accounting adjustments
as of December 31, 2003 (in millions):