Great Elm Capital Group, Inc. Enters Into Agreement to Establish Operating and Governance Independence
September 18 2017 - 6:13PM
Great Elm Capital Group, Inc. (NASDAQ:GEC) (“Great Elm”) and MAST
Capital Management, LLC (“MAST”) announced today that they entered
into a number of agreements. Great Elm, MAST, Northern Right
Capital Management, L.P. (“Northern Right”) and other parties
entered into a series of agreements that facilitate Great Elm’s
transition to an independent operating entity and align value
creation with stockholders. Great Elm Capital Management,
Inc. (“GECM”) was formed in 2016 through a series of transactions
that initially shared services with MAST under a cost sharing
agreement with MAST. As Great Elm’s strategy has developed
and its strategic plan became more defined, the parties determined
that such arrangements are no longer mutually beneficial. A copy of
the agreements will be filed with the Securities and Exchange
Commission and should be read carefully in their entirety.
The agreements effect a full separation of Great
Elm’s business from MAST. Highlights of these agreements
include:
- Peter A. Reed will assume the position of CEO of Great Elm in
addition to his role as CIO of GECM. Mr. Reed was elected by
MAST to serve on Great Elm’s board in 2015, led the formation of
GECM and associated transactions and has a 13-year track record of
leading investments in equity and debt instruments of leveraged
companies;
- Great Elm will no longer provide services to MAST, including
shared investment management, legal and compliance personnel and
office space;
- All employees, including Peter Reed and Adam Kleinman, are no
longer employees of MAST. Great Elm’s executives, business
development and investment personnel will focus 100% of their
professional efforts on Great Elm’s businesses;
- The principal of the note issued by a Great Elm subsidiary to
MAST was reduced by $7.3 million;
- 220,000 shares of Great Elm common stock were retired;
- The parties terminated their cost sharing agreement; and
- Jeffrey Serota was elected chairman of Great Elm’s Board of
Directors.
“Establishing independence from MAST will allow
our team to focus on our mission of growing our investment
management business, as well as to consider acquisitions of other
assets and businesses. We are extremely excited to continue
our efforts of utilizing our advantaged balance sheet to drive
shareholder value,” said Mr. Reed.
As part of the transaction, MAST has the right
to purchase from Great Elm an additional 420,000 shares of Great
Elm common stock at market prices. David Steinberg, founding
partner of MAST, said, “As the largest stockholder of Great Elm,
MAST looks forward to the Great Elm board guiding the company with
a focus on value creation.”
Northern Right, a recent 4.9% stockholder of
Great Elm, has recommended additional shareholder alignment.
Great Elm and Northern Right agreed to:
- an additional investment by Northern Right in up to 1,266,000
shares of Great Elm’s common stock from Great Elm; and
- the appointment of Matthew A. Drapkin to Great Elm’s nominating
and corporate governance committee and its compensation
committee.
Now fully separate from MAST, Great Elm executed
a cost reduction program for its investment management team,
including downsizing and reducing fixed cash compensation by $1.5
million and tying incremental compensation to EBITDA targets.
As part of the agreements, MAST and their
respective affiliates entered into a standstill and voting
agreement.
About Great Elm Capital
Group
Great Elm Capital Group, Inc. (NASDAQ:GEC) is a
holding company that is actively seeking acquisitions and, through
its subsidiaries, conducts an investment management business
focused on leveraged finance. Great Elm Capital Group’s
website at greatelmcap.com.
Safe Harbor Statement under the Private
Securities Litigation Reform Act of 1995.
With the exception of the historical information
contained in this news release, the matters described herein
contain “forward-looking” statements that involve risk and
uncertainties that may individually or collectively impact the
matters herein described. These are detailed in the “Risk
Factors” section of the registration statement and in Great Elm
Capital Group’s SEC reports filed from time to time. Further
information relating to Great Elm Capital Group’s financial
position, results of operations, and investor information is
contained in the company’s annual and quarterly reports filed with
the SEC and available for download at its website
www.greatelmcap.com or at the SEC website www.sec.gov.
Media & Investor
Contact:
Great Elm Capital
Group
Meaghan K.
Mahoney
+1 617
375-3006
mmahoney@greatelmcap.com
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