Why We Are Short Ares Capital
Nicholas Marshi • 42 Comments
Nicholas Marshi • 42 Comments
Mon, May 23, 8:05 AM
- American Capital (NASDAQ:ACAS) shareholders will receive $6.41 per share in cash plus 0.483 shares of Ares Capital (NASDAQ:ARCC) for each share of ACAS they own - a total of $13.75 per share at current prices. As part of the deal, Ares Management (NYSE:ARES) is providing financial support, will pay $275M in cash, or $1.20 per share to America Capital shareholders, and has agreed to waive up to $100M in fees over the ten quarters following the close.
- The deal is expected to be immediately accretive to ARCC core EPS, with potential for boosted dividends over time. It's also expected to boost NAV per share between the first and second full years after closing, and beyond.
- An owner of 14.4% of American Capital, Elliot Management is fully supportive of the deal. It's expected to close within the next 12 months.
- Conference call at 8:30 ET.
- Stocks are all halted from trade at the moment.
- Previously: Ares Capital buying American Capital; American Capital Agency internalizing manager (May 23)
Mon, May 23, 7:52 AM
- American Capital (NASDAQ:ACAS) owners will receive about $3.43B in cash and ARCC common stock consideration, or $14.95 per share.
- In addition, American Capital is selling the manager of American Capital Agency (NASDAQ:AGNC) to American Capital Agency for $562M, or $2.45 per share. Ares Management (NYSE:ARES) will help finance the deal.
- Together, American Capital shareholders are getting $17.40 in value for each share they own vs. Friday's close of $15.62.
- A conference call is set for 8:30 ET.
Nov. 25, 2015, 2:14 PM
- Ares Capital (ARCC -0.4%) CEO Kip deVeer has played down a whole lot of interest in launching some sort of consolidation wave in the BDC sector, but it could be the most logical buyer of American Capital (ACAS +8.2%) should the company put itself on the block, writes Gillian Tan.
- Even though Ares trades at a lower P/E multiple than ACAS, on a relative book value basis, American Capital is the cheaper stock, so a deal could make sense. As always, it'll come down to price, and Elliot Capital's price target of at least $23 per share - a 60% premium to yesterday's close - looks very steep.
- American Capital's board, and Elliot - whose average buy price is $13.30 - may have to settle for less.
- Previously: American Capital gains on strategic review, boost to buyback (Nov. 25)
Oct. 9, 2015, 3:27 PM
- Ares Capital (ARCC -0.6%) CEO Kipp deVeer - speaking at the company investor day last week - poured a little bit of cold water on ideas of a wave of consolidation in the BDC sector.
- Why wouldn't he be interested in picking up a BDC selling for 0.7x NAV for, say 0.9x? 1) It's a mess, which is what we're watching right now (referring to the TICC deal); 2) Making a few points on $300M of assets isn't material enough for the effort necessary; 3) If management were to go to a board asking to sell the company at 0.9x NAV, the board would rightly go "You're fired," we're bringing in someone to liquidate at NAV because that's what you told us it was worth.
- The TICC board faces plenty of challenges in that TICC isn't facing credit quality issues, so why would it be interested in selling to TPG Specialty (NYSE:TSLX) at 0.87x book? On the other hand, turning the company over to Benefit Street Partners may not be a great deal either (there's still NexPoint).
- The major takeaway: Barring any real industry stress, don't expect a lot of deals to get done. Why would management teams - in the chips just for showing up for work each day - give that up unless they were about to lose it all anyway. As the BDC team at Wells Fargo says, the events surrounding TICC "make us sad for the industry."
- Source: Jordan Wathan at The Motley Fool
- ETFs: BDCL, BDCS, BIZD, FGB
- Previously: TICC Capital sued by NexPoint Advisors (Oct. 9)
- Previously: Wells Fargo excoriates TICC Capital board (Oct. 7)
Jun. 30, 2015, 7:21 AM
- General Electric (NYSE:GE) has confirmed the sale of its European private equity financing business to a unit of Japan's Sumitomo Mitsui Banking Corp. for $2.2B.
- GE Capital will retain its $1B investment in the European Senior Secured Loan Program and European Loan Program, both joint ventures between affiliates of GE Capital and affiliates of Ares Capital (NASDAQ:ARCC).
- The deal is expected to close in the third quarter of 2015.
- GE +0.6% premarket
- Previously: GE close to European PE unit sale (Jun. 30 2015)