Equus Shareholders Grant New Authorization to Withdraw BDC Election
May 23 2018 - 12:38PM
Authorization Supports Company’s
Continued Intentto Effect a Transformative
Reorganization
Equus Total Return, Inc. (NYSE:EQS) (“Equus” or the “Company”)
today announced that its shareholders have granted a new
authorization to the Company’s Board of Directors (hereinafter, the
“Board”) to cause the Company’s withdrawal of its election to be
classified as a business development company (“BDC”) under the
Investment Company Act of 1940 (the “1940 Act”). Previous
authorizations to this effect were given to the Board on January 6,
2017 and again on August 25, 2017, both of which have since
expired. The new authorization given to the Board by the
Equus shareholders expires on August 31, 2018. These
authorizations are a consequence of the Company’s Plan of
Reorganization announced on May 15, 2014 (also referred to herein
as the “Plan”).
In announcing the Plan, Equus stated its intention to implement
the Plan which entailed, among other things: (i) the restructuring
of the Company by way of an acquisition of, or merger with, an
operating company (referred to in the Plan as a “Consolidation”),
and (ii) a withdrawal of the Company’s election to be classified as
a BDC. Although Equus has been authorized to withdraw and
terminate the Company’s BDC election under the 1940 Act, it will
not submit any such withdrawal unless and until Equus has entered
into a definitive agreement to effect a Consolidation – which will
entail acquiring or merging with an operating company.
The Company’s Board of Directors, together with management,
regularly reviews and evaluates the Company’s performance,
prospects and long-term strategic plans in light of the Company’s
business and the industries in which it invests. These reviews have
included periodic consideration of potential strategic transactions
to maximize value to shareholders. Commencing in September 2012,
management of the Company began to explore various strategic
options to maximize shareholder value that could, if effected,
result in the acquisition of the Company by another corporation or
a change in the Company’s structure from a BDC into an operating
company. These efforts culminated in the adoption of the
Plan.
Since the adoption of the Plan, Company management has examined
a number of potential transactions and strategic alternatives to
effect a Consolidation under the Plan. On April 24, 2017,
Equus entered into an agreement to acquire U.S. Gas & Electric,
Inc. (“USG&E”), a retail and commercial energy services
provider. This agreement was terminated on May 30, 2017 by
USG&E when it notified Equus that the USG&E board had
received an acquisition offer from a third party that was deemed by
USG&E to constitute a “Superior Proposal” to the terms and
conditions offered to the USG&E shareholders by the
Company. Since the termination of the agreement to acquire
USG&E, the Company has again examined a number of potential
transactions in a variety of industries, including energy, natural
resources, containers and packaging, real estate, technology, and
telecommunications.
While Equus is endeavoring to achieve a Consolidation and is
presently evaluating various opportunities that could enable it to
do so, no assurance can be given that the Company will be able to
complete a Consolidation before August 31, 2018 or at all.
Moreover, no assurance can be given that the terms of any such
transaction that would embody a Consolidation would be acceptable
to the Company or its stockholders.
The completion of the Plan and the restructuring of Equus into
an operating company are subject to various conditions, risks, and
uncertainties, among which include the following:
- Although the Equus shareholders have authorized the Company’s
withdrawal as a BDC, they have not approved a Consolidation, the
consummation of which is the final step in the Plan.
Moreover, although Company management is presently reviewing
various potential transactions, the Equus Board has not, at this
time, approved any proposed Consolidation and the Company cannot
guarantee that, once such Board approval is obtained, the Equus
shareholders will in turn approve the same. Consequently, the
Company cannot guarantee that it will withdraw its BDC election, or
the exact timing of such withdrawal, or that Equus will otherwise
complete the Consolidation and become an operating company not
subject to the 1940 Act.
- Even if Equus enters into a definitive agreement that would
result in a Consolidation, it may not be able to fulfill the
closing conditions thereunder and, therefore, may ultimately not
complete a Consolidation within the time frame authorized by the
Equus shareholders to withdraw the Company’s BDC
election.
- If Equus is able to be restructured as an operating company
instead of a closed-end fund, it will continue to be subject to
various investor protections afforded to operating company
shareholders pursuant to Delaware corporate law and the Securities
Exchange Act of 1934. Further, assuming that Equus, following
the Consolidation, meets the operating company listing standards of
the New York Stock Exchange (“NYSE”), the Company’s shareholders
will also be afforded protections under applicable NYSE
rules. Nevertheless, since Equus will not be regulated under
the 1940 Act following a Consolidation, the Company will not be
subject to a number of limitations and restrictions of the 1940 Act
intended to protect shareholders, including, for example,
restrictions on leverage, types and domicile of investments, and
restrictions on the Company’s ability to change its business.
Further, even though Equus would continue to be subject to various
restrictions concerning its securities and interested transactions
under the Securities Exchange Act, applicable stock exchange rules,
and Delaware law, it would not also be subject to more restrictive
1940 Act provisions concerning similar issues, such as share
repurchases below net asset value, the issuance of Equus securities
other than common stock for investments and acquisitions, the ratio
of independent to interested directors on the Equus Board, related
party transactions, and director and officer incentive
compensation.
These risks should be considered in addition to the items
identified as “Risk Factors” in the Company’s most recent Annual
Report on Form 10-K filed with the Securities and Exchange
Commission (the “SEC”) on April 17, 2018.
Forward-Looking Statements
This press release contains certain forward-looking statements
regarding possible future circumstances. These forward-looking
statements are based upon the Company’s current expectations and
assumptions and are subject to various risks and uncertainties that
could cause actual results to differ materially from those
contemplated in such forward-looking statements including, in
particular, the performance of the Company, including our ability
to achieve our expected financial and business objectives, our
ability to execute our reorganization (including a possible
Consolidation) and complete the transactions contemplated thereby,
the other risks and uncertainties described herein, as well as
those contained in the Company’s filings with the SEC. Actual
results, events, and performance may differ. Readers are
cautioned not to place undue reliance on these forward-looking
statements, which speak only as to the date hereof. The
Company undertakes no obligation to release publicly any revisions
to these forward-looking statements that may be made to reflect
events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events. The inclusion of any statement
in this release does not constitute an admission by the Company or
any other person that the events or circumstances described in such
statements are material.
Contacts:
Patricia Baronowski Pristine Advisers, LLC (631) 756-2486
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