American Capital To Sell Operations; Moody's Upgrade Likely
Zacks Investment Research | May 23, 2016 09:00PM ET
Putting an end to all speculations about possible sale or restructuring, American Capital, Ltd. (NASDAQ:ACAS) announced the sale of its operations for $4 billion through two separate deals.
New York-based specialty finance company, Ares Capital Corporation (NASDAQ:ARCC) , is set to acquire American Capital for $3.43 billion in a cash and stock deal. The deal will boost Ares Capital’s position as a major business development company in the nation and a direct lender to middle market companies. Upon closure of the transaction, shareholders of Ares Capital are likely to own around 73.9% while shareholders of American Capital will own the remaining 26.1% of the combined entity.
The deal however, excludes American Capital Mortgage Management, LLC, which is being sold to American Capital Agency Corp. (NASDAQ:AGNC) in a separate transaction for $562 million.
The combined deals value American Capital at $17.40 per share, reflecting a premium of 11.4% to its closing price on Friday.
The Ares Capital's acquisition is subject to several conditions including American Capital and Ares Capital shareholder approvals. Also, the deal is subject to the completion of the sale of the mortgage wing of American Capital to American Capital Agency. Upon fulfillment of the conditions, the deal is expected to close within the next 12 months and be immediately accretive to Ares Capital’s core earnings per share.
Malon Wilkus, Chairman and Chief Executive Officer of American Capital stated, "Our shareholders should benefit immediately from the stable dividend offered by Ares Capital and the fee waiver support provided by Ares Management."
Financial advisors to American Capital were The Goldman Sachs Group, Inc. (NYSE:GS) and Credit Suisse (SIX:CSGN) Securities (USA) LLC.
A Surprising Move?
The latest move by American Capital, does not come as a surprise as in January the company had announced the conclusion of the initial phase of its strategic review and its plan to proceed with soliciting offers.
The Maryland-based private equity firm and asset manager announced the strategic review process last November stating that it will fully review alternatives including the sale of the company or partly sale of various business lines as well as review of its spin off plans. Interestingly, the announcement came in less than two weeks after billionaire investor Paul Singer's hedge fund Zacks Investment Research
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