Prospect Capital to Allied Capital: Good-Bye

Includes: AFC, ARCC, PSEC
by: Nicholas Marshi

It's official ! Today Prospect Capital (PSEC) formally withdrew its counteroffer to purchase Allied Capital (NYSEARCA:ALD), leaving the field clear for Ares Capital (NASDAQ:ARCC). Here is the full text of the press release:

Prospect Capital Corporation (NASDAQ:PSEC) ("Prospect") for weeks has stated that Prospect believes greater value could be achieved for shareholders of Allied Capital Corporation ("Allied") beyond that offered by Ares Capital Corporation ("Ares"). While we disagree with the Allied board's refusal to respond in any constructive way to any of our offers, we believe that Prospect's efforts to shine a spotlight on the proposed Allied-Ares combination have succeeded in unlocking additional value for Allied's shareholders, as shown by the newly announced Allied special dividend.

After careful review and in light of the Allied board's manifest unwillingness to engage in any constructive discussions with Prospect, we have decided that it is not in the interest of Prospect and its shareholders to expend further resources on a solicitation in opposition to the proposed Allied-Ares combination. Accordingly, we have terminated our solicitation. Should the proposed Allied-Ares combination not be consummated and the Allied board wish to engage in a productive dialogue with us, we would welcome that opportunity.

Note that Prospect cannot help patting themselves on the back for causing Allied to pay out a Special Dividend to shareholders. Of course, Ares Capital and Allied denied there was any connection between Prospect's wooing and the sweetening of the deal for Allied shareholders. On this one, we're with Prospect.

Prospect's withdrawal, though, does seem to ensure the Ares-Allied Capital deal will close. In fact, the merger should be signed, sealed and delivered by month's end. It's been quite a ride.

Disclosure: Long ARCC, long PSEC, no position ALD