MCC merger shareholder vote gets delayed until March

Shareholders have a little extra time to decide on the merger proposal of Medley Capital Corporation (MCC) and Medley Management (MDLY) into Sierra Income Corporation.

The stockholders’ vote, originally scheduled for 8 February, has been delayed until March, according to a statement issued Tuesday. The three entities blamed the delay on the US government shutdown, saying necessary documentation for the merger could not be reviewed by the Securities and Exchange Commission prior to the vote.

A day before the postponement, MCC and Sierra said they would officially decline a merger bid for MCC and Sierra by NexPoint Advisors, which the latter said would create or save $225 million in value for MCC shareholders. NexPoint’s bid involves the merger of MCC into Sierra, but excluded MDLY entirely, and would place the new entity under NexPoint’s management.

Sierra and MCC management said they had declined the proposal because they found it to be misleading to the business development companies’ shareholders, and they thought it deprived their investors of value that could be found in the original proposal.

Medley declined to comment further than the press release.

“The announcement from MCC and Sierra about their refusal to pursue NexPoint’s proposal highlights the disregard they have for stockholders’ interests,” a NexPoint representative said in a statement. “NexPoint received no communication from the MCC and Sierra boards beyond a mere acknowledgement of receipt from Sierra board counsel, despite our clear willingness to negotiate all terms of our proposal.”

The spokesperson added, “So for MCC and Sierra to claim a ‘rigorous and thorough review’ is simply false. We believe that they are pushing a bad deal on their stockholders that enriches and entrenches management without considering better options.”

On Tuesday, both sides of the ballot box received additional third-party support. FrontFour Capital announced that the Institutional Shareholder Service had reversed its original endorsement from 27 January and was now encouraging shareholders to vote against the proposal. ISS said its reversal was due to the response from MCC regarding the bid by NexPoint.

FrontFour Capital could not be reached for comment by press time.

Also on Tuesday, MCC said proxy advisory firm Egan-Jones wrote in a 31 January report that it believed shareholders should vote in favour of the proposal. It argued that the BDC management-backed merger is the best option for stockholders.

NexPoint Advisors is a Dallas-based affiliate of Highland Capital Management. Medley Management is a New York-based asset management firm that has more than $4.8 billion in assets under management and advises Sierra and MCC.