Sierra Income Corporation (“Sierra” or the “Company”), Medley
Capital Corporation (NYSE: MCC, “MCC”) (TASE:MCC), and Medley
Management Inc. (NYSE:MDLY, “MDLY” or “Medley”) joint announcement.
Sierra, MCC and MDLY have entered into
definitive agreements for Sierra to acquire MCC and MDLY. MCC will
merge with and into Sierra, with Sierra as the surviving company.
Simultaneously, Sierra will acquire MDLY, and MDLY’s existing asset
management business will operate as a wholly-owned subsidiary of
Sierra. The Boards of Directors of Sierra, MCC and MDLY unanimously
approved the transactions based on recommendations of independently
advised special committees of independent directors at each
company, respectively.
Transaction Highlights:
- The combined company will have over $5 billion of assets under
management, including $2 billion of internally managed assets1
- Sierra is expected to be the second largest internally managed
Business Development Company (“BDC”) and the seventh largest
publicly traded BDC
- Expected to be accretive to net investment income per share for
both Sierra and MCC
- Expected to increase liquidity for shareholders of Sierra, MCC
and MDLY
The transaction is expected to add scale to the
BDC platform, increase operational efficiencies, create a stronger
balance sheet and improve portfolio diversification. In addition,
growth of MDLY’s existing asset management business would add to
NII and NAV over time.
The senior leadership and the investment
management teams will remain intact as part of this transaction.
The board of Sierra following the transaction will consist of the
current independent directors from Sierra, one interested director
from Sierra and two independent directors from MCC.
MCC shareholders will receive 0.8050 shares of
Sierra Common Stock for each share of MCC Common Stock.
MDLY Class A shareholders will receive 0.3836
shares of Sierra Common Stock for each Medley Class A share, $3.44
per share of cash consideration and $0.65 per share of special cash
dividends.
Medley LLC Unitholders have agreed to convert
their units into MDLY Class A Common Stock, and will receive 0.3836
shares of Sierra Common Stock for each MDLY Class A share, $3.44
per share of cash consideration and a $0.35 per share special cash
dividend. As part of the transaction, Medley LLC Unitholders have
agreed to forgo all payments that would be due to them under the
existing Tax Receivable Agreement with Medley for the benefit of
the combined company.
At close, current Sierra shareholders will
continue to own shares of Sierra Common Stock. As a condition to
closing the transactions, Sierra’s common stock will be listed to
trade on the New York Stock Exchange and Sierra will remain a
BDC. There are no expected changes to the current dividend
policies of the respective entities prior to the closing of the
transaction, except that MCC will be promptly terminating any
feature of its dividend reinvestment plan. In addition, Sierra will
promptly be suspending any share repurchase program or offers
to repurchase. It is anticipated that Sierra will continue with its
current dividend policy after the close of the transaction.
“We are excited to bring together these three
complementary entities to create a single, large-scale BDC and
credit manager,” said Brook Taube, CEO of Medley.
The mergers are cross conditioned upon each
other and are subject to approval by Sierra, MCC and MDLY
shareholders, regulatory review, other customary closing conditions
and third party consents. The transaction is expected to close in
the fourth quarter of 2018 or early in 2019.
Transaction Advisors:
- The Special Committee of Sierra Income Corporation’s Board of
Directors is served by financial advisor Broadhaven Capital
Partners, LLC and legal counsel Sullivan & Worcester LLP
- The Special Committee of Medley Capital Corporation’s Board of
Directors is served by financial advisor Sandler O’Neill +
Partners, L.P. and legal counsel Kramer Levin Naftalis &
Frankel LLP
- The Special Committee of Medley Management Inc.’s Board of
Directors is served by financial advisor Barclays Capital Inc. and
legal counsel Potter Anderson & Corroon LLP
- Medley Management Inc. is served by financial advisor Goldman
Sachs & Co. LLC and legal counsel Eversheds Sutherland (US)
LLP
Joint Conference Call
Sierra, MCC and Medley will host a joint
conference call at 9:00am (Eastern Time), August 10, 2018, to
discuss the transactions.
All interested parties are welcome to
participate and can access the conference call by dialing (877)
524-5743 and using the conference ID 5547448 approximately 10
minutes prior to the call. For interested parties, an archived
replay of the joint conference call will be available by dialing
(855) 859-2056 and using the conference ID 5547448. This conference
call will be broadcast live over the Internet and can be accessed
by all interested parties through Medley’s website,
http://www.mdly.com. To listen to the live call, please go to
Medley’s website at least 15 minutes prior to the start of the call
to register and download any necessary audio software.
An archived replay will also be available
through a webcast link located on the page of the Investor
Relations section of Medley's website.
A joint slide presentation containing
supplemental information from Sierra, MCC and Medley will be
referenced on the conference call and is available on each of the
entities’ websites.
__________________________
1 Estimates of Sierra’s post-merger financial
position are based on the publicly reported financial information
of Sierra, MCC and MDLY as of June 30, 2018.
2 Medley Management Inc. is the parent
company of Medley LLC and several registered investment
advisors (collectively, “Medley”). Assets under management refers
to assets of our funds, which represents the sum of the net asset
value of such funds, the drawn and undrawn debt (at the fund level,
including amounts subject to restrictions) and uncalled committed
capital (including commitments to funds that have yet to commence
their investment periods). Assets under management are as
of June 30, 2018.
ABOUT SIERRA INCOME CORPORATION
Sierra is a non-traded business development
company (“BDC”) that invests primarily in first lien senior secured
debt, second lien secured debt and, to a lesser extent,
subordinated debt of middle market companies in a broad range of
industries with annual revenue between $50 million and $1 billion.
Sierra’s investment objective is to generate current income, and to
a lesser extent, long-term capital appreciation. Sierra is
externally managed by SIC Advisors LLC, which is an investment
adviser registered under the Investment Advisers Act of 1940, as
amended. For additional information, please visit Sierra Income
Corporation at www.sierraincomecorp.com.
ABOUT MEDLEY CAPITAL CORPORATION
Medley Capital Corporation is a closed-end,
externally managed business development company ("BDC") that trades
on the New York Stock Exchange (NYSE:MCC) and the Tel Aviv Stock
Exchange (TASE:MCC). Medley Capital Corporation's investment
objective is to generate current income and capital appreciation by
lending to privately-held middle market companies, primarily
through directly originated transactions, to help these companies
expand their businesses, refinance and make acquisitions. Our
portfolio generally consists of senior secured first lien loans and
senior secured second lien loans. Medley Capital Corporation is
externally managed by MCC Advisors LLC, which is an investment
adviser registered under the Investment Advisers Act of 1940, as
amended. For additional information, please visit Medley Capital
Corporation at www.medleycapitalcorp.com.
ABOUT MEDLEY
Medley is an alternative asset management firm
offering yield solutions to retail and institutional investors.
Medley’s national direct origination franchise is a premier
provider of capital to the middle market in the U.S. Medley has
over $5 billion of assets under management in two
business development companies, Medley Capital
Corporation (NYSE:MCC) (TASE:MCC) and Sierra Income
Corporation, a credit interval fund, Sierra Total Return Fund
(NASDAQ:SRNTX) and several private investment vehicles. Over the
past 15 years, Medley has provided capital to over 400 companies
across 35 industries in North America.2
Medley LLC, the operating company of Medley
Management Inc., has outstanding bonds which trade on
the NYSE under the symbols (NYSE:MDLX) and
(NYSE:MDLQ). Medley Capital Corporation is dual-listed on
the New York Stock Exchange (NYSE:MCC) and the Tel
Aviv Stock Exchange (TASE: MCC) and has outstanding bonds
which trade on both the New York Stock Exchange under the
symbols (NYSE:MCV), (NYSE:MCX) and the Tel Aviv Stock
Exchange under the symbol (TASE: MCC.B1).
Forward-Looking Statements
This communication 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
transactions. Such forward-looking statements reflect current views
with respect to future events and financial performance, and each
of Sierra, MCC and Medley may make related oral forward-looking
statements on or following the date hereof. Statements that include
the words “should,” “would,” “expect,” “intend,” “plan,” “believe,”
“project,” “anticipate,” “seek,” “will,” and similar statements of
a future or forward-looking nature identify forward-looking
statements in this material or similar oral statements for purposes
of the U.S. federal securities laws or otherwise. Because
forward-looking statements, such as the date that the parties
expect the proposed transactions to be completed and the
expectation that the proposed transactions will provide improved
liquidity for Sierra, MCC, and Medley stockholders and will be
accretive to net investment income for both Sierra and MCC, include
risks and uncertainties, actual results may differ materially from
those expressed or implied and include, but are not limited to,
those discussed in each of Sierra’s, MCC’s and Medley’s filings
with the Securities and Exchange Commission (the “SEC”), and (i)
the satisfaction or waiver of closing conditions relating to the
proposed transactions described herein, including, but not limited
to, the requisite approvals of the stockholders of each of Sierra,
MCC, and Medley, Sierra successfully taking all actions reasonably
required with respect to certain outstanding indebtedness of MCC
and Medley to prevent any material adverse effect relating thereto,
certain required approvals of the SEC and the Small Business
Administration, the necessary consents of certain third-party
advisory clients of Medley, and any applicable waiting period (and
any extension thereof) applicable to the transactions under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
shall have expired or been terminated, (ii) the parties’ ability to
successfully consummate the proposed transactions, and the timing
thereof, and (iii) the possibility that competing offers or
acquisition proposals related to the proposed transactions will be
made and, if made, could be successful. Additional risks and
uncertainties specific to Sierra, MCC and Medley include, but are
not limited to, (i) the costs and expenses that Sierra, MCC and
Medley have, and may incur, in connection with the proposed
transactions (whether or not they are consummated), (ii) the impact
that any litigation relating to the proposed transactions may have
on any of Sierra, MCC and Medley, (iii) that projections with
respect to dividends may prove to be incorrect, (iv) Sierra’s
ability to invest our portfolio of cash in a timely manner
following the closing of the proposed transactions, (v) the market
performance of the combined portfolio, (vi) the ability of
portfolio companies to pay interest and principal in the future;
(vii) the ability of Medley to grow its fee earning assets under
management; (viii) whether Sierra, as the surviving company, will
trade with more volume and perform better than MCC and Medley prior
to the proposed transactions; and (ix) negative effects of entering
into the proposed transactions on the trading volume and market
price of the MCC’s or Medley’s common stock.
The foregoing review of important factors should
not be construed as exhaustive and should be read in conjunction
with the other cautionary statements that will be included in the
Joint Proxy Statement/Prospectus (as defined below) relating to the
proposed transactions, and in the “Risk Factors” sections of each
of Sierra’s, MCC’s and Medley’s most recent Annual Report on Form
10-K and most recent Quarterly Report on Form 10-Q. The forward-
looking statements in this press release represent Sierra’s, MCC’s
and Medley’s views as of the date of hereof. Sierra, MCC and Medley
anticipate that subsequent events and developments will cause their
views to change. However, while they may elect to update these
forward-looking statements at some point in the future, none of
Sierra, MCC or Medley have the current intention of doing so except
to the extent required by applicable law. You should, therefore,
not rely on these forward-looking statements as representing
Sierra’s, MCC’s or Medley’s views as of any date subsequent to the
date of this material.
Additional Information and Where to Find
It
In connection with the proposed transactions,
Sierra intends to file with the SEC and mail to its stockholders a
Registration Statement on Form N-14 that will include a proxy
statement and that also will constitute a prospectus of Sierra, and
MCC and Medley intend to file with the SEC and mail to their
respective stockholders a proxy statement on Schedule 14A
(collectively, the “Joint Proxy Statement/Prospectus”). The
definitive Joint Proxy Statement/Prospectus will be mailed to
stockholders of Sierra, MCC, and Medley, respectively. INVESTORS
AND SECURITY HOLDERS ARE URGED TO READ THE JOINT PROXY
STATEMENT/PROSPECTUS, 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
SIERRA, MCC, AND MEDLEY, THE PROPOSED TRANSACTIONS AND RELATED
MATTERS. When available, investors and security holders
will be able to obtain the Joint Proxy Statement/Prospectus and
other documents filed with the SEC by Sierra, MCC, and Medley, free
of charge, from the SEC’s web site at www.sec.gov and from
Sierra’s website (www.sierraincomecorp.com), MCC’s website
(www.medleycapitalcorp.com), or Medley’s website (www.mdly.com).
Investors and security holders may also obtain free copies of the
Joint Proxy Statement/Prospectus and other documents filed with the
SEC from Sierra, MCC, or Medley by contacting Sam Anderson,
Medley’s Investor Relations contact, at 212-759-0777.
Participants in the
Solicitation
Sierra, MCC, and Medley and their respective
directors, executive officers, other members of their management,
employees and other persons may be deemed to be participants in the
anticipated solicitation of proxies in connection with the proposed
transactions. Information regarding Sierra’s directors and
executive officers is available in its definitive proxy statement
for its 2018 annual meeting of stockholders filed with the SEC on
March 14, 2018 (the “Sierra 2018 Proxy
Statement”). Information regarding MCC’s directors and
executive officers is available in its definitive proxy statement
for its 2018 annual meeting of stockholders filed with the SEC on
December 21, 2017 (the “MCC 2018 Proxy
Statement”). Information regarding Medley’s directors and
executive officers is available in its annual report for the year
ended December 31, 2017 on Form 10-K filed with the SEC on March
29, 2018 (the “Medley 2017 10-K”). To the extent
holdings of securities by such directors or executive officers have
changed since the amounts disclosed in the Sierra 2018 Proxy
Statement, the MCC 2018 Proxy Statement, and the Medley 2017 Form
10-K, such changes have been or will be reflected on Statements of
Change in Ownership on Form 4 filed by such directors or executive
officers, 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/Prospectus when such documents become available and in
other relevant materials to be filed with the SEC. 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 transactions 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.
Investor Relations Contact: Sam Anderson,
212-759-0777 Head of Capital Markets & Risk Medley Management
Inc.
Media Contact: Erin Clark, 646-214-8355 Teneo
Holdings LLC
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