Thursday, March 4th, 2010
Activist Shareholder Objects to Allied Capital Merger
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Allied Capital Corporation (NYSE:ALD) will vote on a merger agreement proposed by Ares Capital Corporation (NASDAQ:ARCC) later this month, but the proposal is already receiving some flak from at least one activist shareholder.
Allied Capital Corporation (ALD, Free Analysis), a business development company that has been surrounded by controversy in recent years, will vote on a proposed merger agreement with Ares Capital Corporation (ARCC, Free Analysis) on March 26, 2010. However, at least one shareholder disagrees with the proposed exchange ratio of 0.325 shares of ARCC per share.
Centaurus Capital, which owns a 3.7% stake in the BDC, believes that the 0.325 shares of Ares common stock offered for each share of Allied common stock significantly undervalues the company, particularly as Prospect Capital also expressed interest in an acquisition. And with full repayment of its senior secured private debt in February, the company is now financially robust.
Under the current structure, Ares will acquired Allied at a 40% discount to its net asset value per share, while retaining a 70% equity interest in the combined entity. The “premium” offered values the company at roughly the same valuation as competitors in the industry, while both its internal and macroeconomic conditions have markedly improved.
Centaurus believes that Allied’s board should allow competing third-party proposals the opportunity to perform due diligence on the company, as long as the counter-offers represent over a 10% premium to the current Ares offer. If accepted, this could lead to higher bids for the firm and a greater premium or existing shareholders.
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-- Written by Rick Telfur
