NEW YORK, May 23, 2016 /PRNewswire/ -- Ares Capital
Corporation (NASDAQ: ARCC) and American Capital, Ltd. (NASDAQ:
ACAS) announced today that they have entered into a definitive
merger agreement under which Ares Capital will acquire American
Capital, excluding American Capital Mortgage Management, LLC.
This transaction enhances Ares Capital's position as the
leading business development company in the United States and a leading direct lender
to middle market companies. The combined company would have
on a pro forma basis more than $13
billion of investments at fair value as of March 31, 2016. The Boards of Directors of both
companies have unanimously approved the transaction.
Under the terms of the Ares transaction, American Capital
shareholders will receive approximately $3.43 billion in total cash and stock
consideration or $14.95 per fully
diluted share. In a separate transaction, American Capital
also announced today that it is selling American Capital Mortgage
Management, LLC to American Capital Agency Corp. (NASDAQ: AGNC) for
$562 million or $2.45 per fully diluted share.
Collectively, the transactions announced today represent
total value for American Capital shareholders of $4.0 billion or approximately $17.40 per fully diluted share, representing a
premium of 11.4% to American Capital's closing price on
May 20, 2016 and a premium of 21.6%
to American Capital's unaffected closing price on November 13, 2015.
American Capital shareholders will receive $1.470 billion in cash from Ares Capital, or
$6.41 per share, plus 0.483 Ares
Capital shares for each American Capital share, resulting in
approximately 110.8 million Ares Capital shares, or $1.682 billion in value or $7.34 per share based on Ares Capital's closing
stock price of $15.19 as of
Friday, May 20, 2016, issued in
exchange for approximately 229.3 million American Capital
shares. Following the transaction, Ares Capital shareholders
are expected to own approximately 73.9% and American Capital
shareholders are expected to own approximately 26.1% of the
combined company.
As part of the aggregate consideration, Ares Management, L.P.
(NYSE: ARES) will provide financial support to the
transaction. Through its subsidiary, Ares Capital Management
LLC, which serves as the investment adviser to Ares Capital, Ares
Management will provide $275 million
of cash, or $1.20 per fully diluted
share, to American Capital shareholders at closing. In
addition, Ares Management has agreed to waive up to $100 million in Part I income based fees (ARCC
Income Based Fees) payable for the ten calendar quarters beginning
the first full quarter following the closing of the transaction, in
an amount of up to $10 million of
ARCC Income Based Fees to the extent earned and payable to Ares
Capital Management in such quarter, to support the expected
profitability of the combined company during the integration and
portfolio repositioning period for the two businesses.
The combined company will remain externally managed by Ares
Capital Management LLC and all current Ares Capital officers and
directors will remain in their current roles.
Ares Capital believes that the significant size and scale of the
combined company will create many strategic and financial benefits
and will position the combined company to capitalize on favorable
market conditions. Including the financial support provided
by Ares Management, it is anticipated that the combination
will:
- Be immediately accretive to core earnings per share, with the
potential for increased dividends over time
- Be accretive to net asset value per share between the first and
second full years after closing and beyond
- Accelerate the expected growth and deployment of Ares Capital's
Senior Direct Lending Program joint venture
- Expand Ares Capital's ability to originate larger transactions
with increased final hold positions, enhancing its market presence
and value proposition with financial sponsors and borrowers
- Capture increased underwriting and distribution fees from
greater syndication opportunities
- Further diversify Ares Capital's balance sheet and enhance
access to lower cost capital from banks and capital markets
participants
"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,"
commented Michael Arougheti,
Co-Chairman of Ares Capital's Board of Directors. "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."
"Similar to the strategy we successfully utilized in our
acquisition of Allied Capital in 2010, we plan to leverage our
robust origination platform to redeploy American Capital's
portfolio into directly-originated investments generating a higher
level of current income and ultimately improved risk-adjusted
returns," said Kipp deVeer, Chief Executive Officer of Ares
Capital. "We are confident in our ability to maximize
long-term value for both Ares Capital and American Capital
shareholders."
"We are excited to have entered into this mutually beneficial
combination with Ares Capital," commented Malon Wilkus, Chairman and Chief Executive
Officer of American Capital. "Our shareholders should benefit
immediately from the stable dividend offered by Ares Capital and
the fee waiver support provided by Ares Management. Moreover,
we expect the combined company to have a more diversified portfolio
and a stronger balance sheet that will position it well for future
growth."
Prior to closing, American Capital may continue its plans to
monetize certain investments (in collaboration with Ares Capital)
and the proceeds of any such sales would be used to retire
indebtedness or to remain in cash balances as the company has
ceased its stock repurchase program. Since March 31, 2016, American Capital has announced
sales of over $550 million in balance
sheet investments.
Elliott Management, holder of a 14.4% interest in American
Capital, strongly supports the transactions and will vote its
shares in favor at the upcoming Special Meeting. Portfolio Managers
Jesse Cohn and Pat Frayne said in a statement, "We are pleased
with the result of the Strategic Review and thank the Independent
Board Committee of ACAS for its hard work and success in delivering
an excellent outcome for shareholders. We believe this transaction
represents the best path forward for ACAS shareholders and creates
a tremendous opportunity for value creation as shareholders of Ares
Capital after the deal is completed. ACAS's streamlined portfolio
will benefit from management by an Ares team that has a stellar
track record of delivering shareholder value."
Consummation of Ares Capital's acquisition of American Capital
is subject to American Capital and Ares Capital shareholder
approvals, customary regulatory approvals and other closing
conditions. The transaction is also conditioned on the
successful completion of the sale of American Capital Mortgage
Management, LLC to American Capital Agency Corp. American Capital
Mortgage Management, LLC is the external advisor to American
Capital Agency Corp. (NASDAQ: AGNC) and American Capital Mortgage
Investment Corp. (Nasdaq: MTGE). Assuming satisfaction of these
conditions, the transaction is expected to close within the next 12
months. However, there is no guarantee that the sale of American
Capital Mortgage Management, LLC or other asset sales described in
this release will be completed and/or that the other conditions to
this transaction will be satisfied.
Wells Fargo Securities, LLC and Bank of America Merrill Lynch
served as financial advisors to Ares Capital. Latham &
Watkins LLP and Willkie Farr &
Gallagher LLP served as legal counsel to Ares Capital. Sutherland
Asbill & Brennan LLP served as legal counsel to the independent
directors of Ares Capital. Proskauer Rose LLP acted as legal
counsel to Ares Management. Goldman Sachs & Co. and
Credit Suisse Securities (USA) LLC
served as financial advisors to American Capital. Skadden,
Arps, Slate, Meagher & Flom LLP served as legal counsel to
American Capital.
Conference Call and Webcast Information
Ares Capital
and American Capital will be holding a joint conference call and
webcast today to discuss the transaction at 8:30 a.m. (Eastern Time). A presentation
outlining the transaction will be posted to the Investor Resources
section of the Ares Capital website under Presentations &
Reports prior to the call. All interested parties are invited to
participate via telephone or the live webcast, which will be hosted
on a webcast link located on the Ares Capital website of the
Investor Resources section at www.arescapitalcorp.com.
Domestic callers can access the conference call by dialing
1-888-317-6003 and International callers can access the conference
call by dialing 1-412-317-6061. All callers will need the
Participant Elite Entry Number 5455406 followed by the # sign and
reference "Ares Capital Corporation" once connected with the
operator. For interested parties, an archived replay of the call
will be available through to domestic callers by dialing
1-877-344-7529 and to international callers by dialing
1-412-317-0088. For all replays, please reference conference
identification number 10086842. An archived replay will also be
available through on a webcast link located on the page of the
Investor Resources section of Ares Capital's website until
June 16, 2016.
About Ares Capital Corporation
Ares Capital is a
leading specialty finance company that provides one-stop debt and
equity financing solutions to U.S. middle market companies, venture
capital backed businesses and power generation projects. Ares
Capital originates and invests in senior secured loans, mezzanine
debt and, to a lesser extent, equity investments through its
national direct origination platform. Ares Capital's investment
objective is to generate both current income and capital
appreciation through debt and equity investments primarily in
private companies. Ares Capital has elected to be regulated as a
business development company ("BDC") and as of March 31, 2016, was the largest BDC by total
assets and market capitalization. Ares Capital is externally
managed by Ares Capital Management LLC, a subsidiary of Ares
Management., L.P. (NYSE: ARES). For more information about Ares
Capital, visit www.arescapitalcorp.com.
About Ares Management, L.P.
Ares Management, L.P. is a
publicly traded, leading global alternative asset manager with
approximately $94 billion of assets
under management as of March 31, 2016
and more than 15 offices in the United
States, Europe and
Asia. Since its inception in 1997,
Ares has adhered to a disciplined investment philosophy that
focuses on delivering strong risk-adjusted investment returns
throughout market cycles. Ares believes each of its three distinct
but complementary investment groups in Credit, Private Equity and
Real Estate is a market leader based on assets under management and
investment performance. Ares was built upon the fundamental
principle that each group benefits from being part of the greater
whole. For more information, visit www.aresmgmt.com.
About American Capital, Ltd.
American Capital, Ltd. is
a publicly traded private equity firm and global asset
manager. American Capital, both directly and through its
asset management business, originates, underwrites and manages
investments in middle market private equity, leveraged finance,
real estate and structured products. As of March 31, 2016, American Capital
managed approximately $20
billion of assets, including assets on its balance sheet and
fee earning assets under management by affiliated managers,
with $77 billion of total assets under management
(including levered assets). Through a wholly owned
affiliate, American Capital manages publicly
traded American Capital Agency Corp. (NASDAQ:
AGNC), American Capital Mortgage Investment
Corp. (NASDAQ: MTGE) and American Capital Senior
Floating, Ltd. (NASDAQ: ACSF) with approximately $10
billion of total net book value. American
Capital and its affiliates operate out of six offices in the
U.S. and Europe. For further information, please refer
to www.AmericanCapital.com.
Cautionary Statement Regarding Forward-Looking
Statements
This press release contains "forward-looking"
statements as that term is defined in Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended by the Private Securities Litigation Reform
Act of 1995, including statements regarding the proposed
transaction between American Capital and Ares Capital pursuant to a
merger between American Capital and Ares Capital. All statements,
other than historical facts, including statements regarding the
expected timing of the closing of the proposed transaction; the
ability of the parties to complete the proposed transaction
considering the various closing conditions; the expected benefits
of the proposed transaction such as improved operations, enhanced
revenues and cash flow, growth potential, market profile and
financial strength; the competitive ability and position of the
combined company following completion of the proposed transaction;
and any assumptions underlying any of the foregoing, are
forward-looking statements. Forward-looking statements concern
future circumstances and results and other statements that are not
historical facts and are sometimes identified by the words "may,"
"will," "should," "potential," "intend," "expect," "endeavor,"
"seek," "anticipate," "estimate," "overestimate," "underestimate,"
"believe," "could," "project," "predict," "continue," "target" or
other similar words or expressions. Forward-looking statements are
based upon current plans, estimates and expectations that are
subject to risks, uncertainties and assumptions. Should one or more
of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially
from those indicated or anticipated by such forward-looking
statements. The inclusion of such statements should not be regarded
as a representation that such plans, estimates or expectations will
be achieved. Important factors that could cause actual results to
differ materially from such plans, estimates or expectations
include, among others, (1) that one or more closing conditions to
the transaction, including certain regulatory approvals or the sale
of American Capital Mortgage Investment Corp and American Capital
Agency Corp., may not be satisfied or waived, on a timely basis or
otherwise, including that a governmental entity may prohibit, delay
or refuse to grant approval for the consummation of the proposed
transaction, may require conditions, limitations or restrictions in
connection with such approvals or that the required approval by the
stockholders of each of American Capital and Ares Capital may not
be obtained; (2) the risk that the merger or other transactions
contemplated by the merger agreement may not be completed in the
time frame expected by American Capital and Ares Capital, or at
all; (3) the ability of American Capital to effectively complete
the purchase and sale agreement between American Capital, American
Capital Agency Corp., American Capital Mortgage Management, LLC and
American Capital Asset Management, LLC; (4) unexpected costs,
charges or expenses resulting from the proposed transaction; (5)
uncertainty of the expected financial performance of the combined
company following completion of the proposed transaction; (6)
failure to realize the anticipated benefits of the proposed
transaction, including as a result of delay in completing the
proposed transaction or integrating the businesses of American
Capital and Ares Capital; (7) the ability of the combined company
to implement its business strategy; (8) difficulties and delays in
achieving synergies and cost savings of the combined company; (9)
inability to retain and hire key personnel; (10) the occurrence of
any event that could give rise to termination of the merger
agreement; (11) the risk that stockholder litigation in connection
with the proposed transaction may affect the timing or occurrence
of the contemplated merger or result in significant costs of
defense, indemnification and liability; (12) evolving legal,
regulatory and tax regimes; (13) changes in laws or regulations or
interpretations of current laws and regulations that would impact
Ares Capital's classification as a BDC; (14) changes in general
economic and/or industry specific conditions; and (15) other risk
factors as detailed from time to time in American Capital's and
Ares Capital's reports filed with the Securities and Exchange
Commission ("SEC"), including American Capital's and Ares Capital's
respective annual reports on Form 10-K for the year ended
December 31, 2015, periodic quarterly
reports on Form 10-Q, periodic current reports on Form 8-K and
other documents filed with the SEC.
Any forward-looking statements speak only as of the date of this
press release. Neither American Capital nor Ares Capital undertakes
any obligation to update any forward-looking statements, whether as
a result of new information or development, future events or
otherwise, except as required by law. Readers are cautioned not to
place undue reliance on any of these forward-looking
statements.
Additional Information and Where to Find It
In
connection with the proposed transaction, American Capital and Ares
Capital plan to file with the SEC and mail to their respective
stockholders a joint proxy statement on Schedule 14A (the "Joint
Proxy Statement"), and Ares Capital plans to file with the SEC a
registration statement on Form N-14 (the "Registration Statement").
The Joint Proxy Statement and the Registration Statement will each
contain important information about American Capital, Ares Capital,
the proposed transaction and related matters. INVESTORS AND
SECURITY HOLDERS ARE URGED TO READ THE JOINT PROXY STATEMENT AND
THE REGISTRATION STATEMENT, AS WELL AS ANY AMENDMENTS OR
SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY
WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT AMERICAN CAPITAL, ARES CAPITAL, THE PROPOSED
TRANSACTION AND RELATED MATTERS. Investors and security holders
will be able to obtain the Joint Proxy Statement, the Registration
Statement and other documents filed with the SEC by American
Capital and Ares Capital, free of charge, from the SEC's web site
at www.sec.gov and from either American Capital's or Ares Capital's
web sites at www.americancapital.com or at www.arescapitalcorp.com.
Investors and security holders may also obtain free copies of the
Joint Proxy Statement, the Registration Statement and other
documents filed with the SEC from American Capital by contacting
American Capital's Investor Relations Department at 1-301-951-5917
or from Ares Capital by contacting Ares Capital's Investor
Relations Department at 1-888-818-5298.
Participants in the Solicitation
American Capital,
Ares Capital and their respective directors, executive officers,
other members of their management and employees may be deemed to be
participants in the solicitation of proxies in connection with the
proposed transaction. Information regarding American Capital's
directors and executive officers is available in an amendment to
its annual report for the year ended December 31, 2015 on Form 10-K/A (the "2016 Form
10-K/A"), filed with the SEC on April 29,
2016. Information regarding Ares Capital's directors and
executive officers is available in its definitive proxy statement
for its 2016 annual meeting of stockholders filed with the SEC on
March 24, 2016. To the extent
holdings of securities by such directors or executive officers have
changed since the amounts printed in American Capital's 2016 Form
10-K/A and Ares Capital's 2016 proxy statement, such changes have
been or will be reflected on Statements of Change in Ownership on
Form 4 filed by such directors or executive offices, as the case
may be, with the SEC. More detailed information regarding the
identity of potential participants, and their direct or indirect
interests, by security holdings or otherwise, will be set forth in
the Joint Proxy Statement and the Registration Statement when such
documents become available. These documents may be obtained free of
charge from the sources indicated above.
No Offer or Solicitation
The information in this press
release is for informational purposes only and shall not constitute
an offer to sell or the solicitation of an offer to sell or the
solicitation of an offer to buy any securities or the solicitation
of any vote or approval in any jurisdiction pursuant to or in
connection with the proposed transaction or otherwise, nor shall
there be any sale, issuance or transfer of securities in any
jurisdiction in contravention of applicable law. No offer of
securities shall be made except by means of a prospectus meeting
the requirements of Section 10 of the Securities Act of 1933, as
amended.
Media Relations:
Mendel Communications
Bill Mendel
1-212-397-1030
bill@mendelcommunications.com
Investor Relations:
Ares Capital Corporation
Jana Markowicz
888-818-5298
markowicz@aresmgmt.com
or
Carl Drake
888-818-5298
cdrake@aresmgmt.com
American Capital Media Relations:
301-968-9400
American Capital Investor Relations:
301-951-5917
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SOURCE Ares Capital Corporation; American Capital Ltd.