Creates Leading Capital Provider to the Middle Market with
Approximately $11 Billion of Committed Capital Under Management
NEW YORK--(BUSINESS WIRE)--Oct. 26, 2009--
Ares Capital Corporation (NASDAQ: ARCC) and Allied Capital Corporation
(NYSE: ALD) announced today that they have entered into a definitive
agreement under which Ares Capital will acquire Allied Capital in an all
stock transaction currently valued at $648 million, or approximately
$3.47 per Allied Capital share. This represents a 27.3% premium to
Allied Capital’s closing stock price on Friday, October 23, 2009. The
Boards of Directors of both companies have each unanimously approved the
transaction.
Under the terms of the transaction, Allied Capital stockholders will
receive 0.325 Ares Capital shares for each Allied Capital share,
resulting in approximately 58.3 million Ares Capital shares being issued
in exchange for the approximately 179.4 million outstanding Allied
Capital shares. Following the transaction, Ares Capital stockholders
will own approximately 65% of the combined company and Allied Capital
stockholders will own approximately 35%. The combined company will
remain externally managed by Ares Capital Management LLC, an affiliate
of Ares Management LLC and will remain headquartered in New York.
Bennett Rosenthal, Michael Arougheti and Richard Davis will remain in
their current roles as Ares Capital’s Chairman, President and Chief
Financial Officer, respectively. It is expected that one member of
Allied Capital’s Board will be nominated to serve on Ares Capital’s
Board.
Consummation of the acquisition is subject to Allied Capital stockholder
approval, Ares Capital stockholder approval, customary regulatory
approvals, certain Ares Capital and Allied Capital lender consents and
other closing conditions. The transaction is expected to close by the
end of the first quarter of 2010.
“We believe this transaction presents an extraordinary opportunity for
value creation for both Ares Capital and Allied Capital stockholders,”
commented Michael Arougheti, President of Ares Capital. “This
transformative transaction creates a middle-market capital provider with
leading market coverage, access to capital, scale and diversification.
We believe that our portfolio composition and prudent balance sheet
management throughout the current cycle have positioned us to deliver
value for our stockholders and to be an industry consolidator.”
“We are excited to have entered into this mutually beneficial
combination with Ares Capital,” commented John Scheurer, Chief Executive
Officer of Allied Capital. “Our stockholders should benefit through
resumed receipt of dividends and ownership in a company with a stronger
balance sheet and proven access to the capital markets. Through this
transaction we expect to create a stronger company that is well
positioned for future growth in a market which presents tremendous
investment opportunities.”
Ares Capital expects to reposition Allied Capital’s portfolio into
higher yielding assets and to seek to lower its financing costs. Ares
Capital believes that it will be in a position to provide additional
capital for portfolio company growth in order to optimize portfolio
returns while mitigating the need for asset divestitures. Ares Capital
expects the transaction to be accretive to both its net asset value and
its core earnings per share in the first year. At closing, Ares Capital
expects the combined company’s debt to equity ratio to be in a range of
0.65x to 0.75x.
The combined company had a pro forma investment portfolio at fair value
of $4.5 billion as of June 30th, 2009. Ares Capital believes
that a balance sheet of this size will allow the combined company to
commit greater amounts of capital in a single transaction, which should
drive higher fee income and greater control over portfolio composition.
This transaction also meaningfully expands the breadth of Ares Capital’s
relationship network, particularly within the private equity community.
The acquisition would also significantly strengthen Ares Capital’s
middle-market asset management platform, Ivy Hill Asset Management,
L.P.. The acquisition will result in a platform with approximately $5.6
billion in committed capital under management and investments in a
significant number of portfolio companies. Ares Capital believes that
the size and breadth of Ivy Hill’s platform provides a robust source for
new balance sheet investment opportunities and unique market insight.
In a separate transaction, Ares Capital has reached an agreement to
acquire Allied Capital’s interests in its Senior Secured Loan Fund LLC
(the “SL Fund,” formerly known as the Unitranche Fund) for $165 million
in cash. With approximately $3.6 billion of committed capital, the SL
Fund was formed in December 2007 to invest in “unitranche” securities of
middle-market companies. The SL Fund currently holds unitranche loans
totaling approximately $900 million. The SL Fund acquisition is expected
to close by the end of October and is subject to completion of final
documentation and satisfaction of other customary closing conditions.
Upon closing, Ares Capital and its SL Fund partner expect to utilize the
SL Fund to make new commitments to future unitranche transactions.
J.P. Morgan Securities Inc. served as financial advisor to Ares Capital
and delivered a fairness opinion to the Ares Capital Board with respect
to the acquisition of Allied Capital by Ares Capital. J.P. Morgan
Securities Inc. also served as financial advisor to Ares Capital with
respect to the acquisition of the interests in the SL Fund. Proskauer
Rose LLP, Latham & Watkins LLP, Venable LLP and Willkie Farr & Gallagher
LLP served as Ares Capital’s legal counsel in connection with the Allied
Capital acquisition. BofA Merrill Lynch served as financial advisor to
Allied Capital and delivered a fairness opinion to the Allied Capital
Board and Sutherland Asbill & Brennan LLP served as Allied Capital’s
legal counsel. Sullivan & Cromwell LLP served as legal counsel to the
Allied Capital Board. Sandler O’Neill & Partners delivered a fairness
opinion to the Allied Capital Board with respect to the acquisition by
Ares Capital.
CONFERENCE CALL INFORMATION
Ares Capital and Allied Capital will be holding a joint conference call
to discuss the transaction on November 5, 2009 at 11:00 am EST following
Ares Capital’s regularly scheduled third quarter earnings conference
call. A presentation outlining the transaction will be posted on the
home page of the Investor Resources section of Ares Capital’s website on
November 5, 2009.
ABOUT ARES CAPITAL CORPORATION
Ares Capital Corporation is a specialty finance company that provides
integrated debt and equity financing solutions to U.S. middle-market
companies. Ares Capital Corporation invests primarily in first- and
second-lien loans and mezzanine debt, which in some cases includes an
equity component. To a lesser extent, Ares Capital Corporation also
makes equity investments. Ares Capital Corporation is externally managed
by Ares Capital Management LLC, an affiliate of Ares Management LLC, an
SEC registered investment advisor and alternative asset investment
management firm with approximately $30.0 billion of committed capital
under management as of September 30, 2009. Ares Capital Corporation is a
closed-end, non-diversified management investment company that has
elected to be regulated as a Business Development Company under the
Investment Company Act of 1940.
ABOUT ALLIED CAPITAL
Allied Capital (NYSE: ALD) is a business development company (BDC) that
is regulated under the Investment Company Act of 1940. Allied Capital
invests long-term debt and equity capital in middle-market businesses
nationwide. Founded in 1958 and operating as a public company since
1960, Allied Capital has been investing in the U.S. entrepreneurial
economy for 50 years. Allied Capital has a diverse portfolio of
investments in 92 companies across a variety of industries. For more
information, please visit www.alliedcapital.com,
call Allied Capital investor relations toll-free at (888) 818-5298, or
e-mail us at ir@alliedcapital.com.
FORWARD-LOOKING STATEMENTS
Statements included herein may constitute “forward-looking statements,”
which relate to future events or the future performance or financial
condition of Ares Capital or Allied Capital or the combined company
following the merger. These statements are not guarantees of future
performance, condition or results and involve a number of risks and
uncertainties. Actual results and condition may differ materially from
those in the forward-looking statements as a result of a number of
factors, including those described from time to time in Ares Capital
Corporation’s or Allied Capital Corporation’s filings with the
Securities and Exchange Commission. Neither Ares Capital Corporation nor
Allied Capital Corporation undertakes any duty to update any
forward-looking statements made herein.
IMPORTANT ADDITIONAL INFORMATION WILL BE FILED WITH THE SEC
This Communication is being made in respect of the proposed business
combination involving Ares Capital and Allied Capital. In connection
with the proposed transaction, Ares Capital plans to file with the SEC a
Registration Statement on Form N-14 that includes proxy statements of
Ares Capital and Allied Capital and that also constitutes a prospectus
of Ares Capital. The definitive Joint Proxy Statement/Prospectus will be
mailed to stockholders of Ares Capital and Allied Capital, respectively.
INVESTORS AND SECURITY HOLDERS OF ARES CAPITAL AND ALLIED CAPITAL ARE
URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS
FILED WITH THE SEC CAREFULLY IN THEIR ENTIRETY WHEN THEY BECOME
AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE
PROPOSED TRANSACTION.
Investors and security holders will be able to obtain free copies of
the Registration Statement and Joint Proxy Statement/Prospectus (when
available) and other documents filed with the SEC by each of Ares
Capital and Allied Capital through the web site maintained by the SEC at www.sec.gov.
Free copies of the Registration Statement and Joint Proxy
Statement/Prospectus (when available) and other documents filed with the
SEC can also be obtained on Ares Capital Corporation’s website at www.arescapitalcorp.com
or on Allied Capital Corporation’s website at www.alliedcapital.com.
PROXY SOLICITATION
Ares Capital, Allied Capital and their respective directors, executive
officers and certain other members of management and employees may be
soliciting proxies from Ares Capital and Allied Capital stockholders in
favor of the acquisition. Information regarding the persons who may,
under the rules of the SEC, be considered participants in the
solicitation of the Ares Capital and Allied Capital stockholders in
connection with the proposed acquisition will be set forth in the Joint
Proxy Statement/Prospectus when it is filed with the SEC. You can find
information about Ares Capital’s executive officers and directors in its
definitive proxy statement filed with the SEC on March 9, 2009. You can
find information about Allied Capital’s executive officers and directors
in its definitive proxy statement filed with the SEC on April 1, 2009.
You can obtain free copies of these documents from Ares Capital and
Allied Capital in the manner set forth above.
Source: Allied Capital Corporation and Ares Capital Corporation
Allied Capital Corporation
Shelley Huchel, 202-721-6100
ir@alliedcapital.com
or
Ares
Capital Corporation
Media:
Mendel Communications
Bill
Mendel, 212-397-1030
bill@mendelcommunications.com
or
Investors:
Ares
Capital Corporation
Carl G. Drake, CFA, 212-750-7300
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