American Capital Selling Operations for $4 Billion
May 23 2016 - 9:40AM
Dow Jones News
American Capital Ltd. on Monday unveiled plans to break itself
up, selling its operations in two deals worth a combined $4
billion.
Ares Capital Corp. agreed to buy most of the operations in a
cash-and-stock deal worth about $3.43 billion, while American
Capital Agency Corp. will buy the mortgage arm for $562
million.
The deals together value American Capital, a
business-development company and asset manager, at $17.40 a share,
a 22% premium to its November share price before activist Elliott
Management Corp. took a stake in the company.
Elliott, which holds a 14.4% position in American Capital, said
it "strongly supports the transactions" and will vote accordingly.
The activist had initially opposed American Capital's previous plan
to separate its business-development operations from its
asset-management arm, calling it a "poison pill" meant to entrench
management.
The companies said the deal will strengthen Ares Capital's
position as a direct lender to middle-market companies.
"The growing demand for capital from middle market borrowers has
created the need for flexible capital providers like us to fill the
financing gap as banks continue to retrench from the market," said
Ares Capital board co-chairman Michael Arougheti. "We believe this
transaction materially enhances our presence as a market leading
direct lender with the size and scale to capitalize on the
attractive competitive dynamics in the market today and for the
foreseeable future."
The transaction is expected to close within 12 months and
immediately add to Ares Capital's earnings.
Shares of American Capital rose 5.4% premarket to $16.46. Shares
of Ares Capital were inactive.
Write to Anne Steele at Anne.Steele@wsj.com
(END) Dow Jones Newswires
May 23, 2016 09:25 ET (13:25 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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