Prospect Capital (PSEC) agrees to acquire specialty finance company Nicholas Financial (NICK) for $16 per share. The purchase is expected to close in April 2014 and the Nicholas board has approved the deal.
For about $199M, Prospect will be acquiring 100% of Nicholas' common stock and any outstanding options on the common. Nicholas' debt amounts to $127M, putting the total deal value at about $326M.
After the close, Prospect will recap the business using a new $250M line of credit. This will repay Nicholas' existing debt and return a portion of Prospect's capital. Following, Prospect will have a net investment of about $139M.
After the close, Prospect expects Nicholas to pay out about all of its net income to Prospect on an ongoing basis. For the year ended September, Nicholas generated pre-tax income of $31.8M. Prospect generated about $220M.
PSEC +0.7% premarket, NICK closed at $15.28 last night.