Medley Capital Corporation (MCC) has received an all-cash offer for its SBIC programme from private investment firm Origami Capital Partners as it reported yet another quarter of losses.
New York-based Origami submitted a $45 million offer to the business development company. The offer represents a 36.2 percent premium over 8 February’s MCC share price of $3.23, the bidder said in a statement. The SBIC allows credit managers to lend to mid-market businesses in the US in partnership with the federal government’s Small Business Administration.
Origami said it sent a similar bid to MCC in April of last year but never received a reply to the original letter expressing interest. MCC disputed that in a regulatory filing, saying it never received any offer from Origami other than the one made public earlier this week.
Origami did not respond to a request for comment, while Medley declined to comment.
MCC said that the firm has obtained “very favourable financing” from the SBA that is a “significant benefit” for the BDC and its shareholders. In addition, the firm said in the Securities and Exchange document that it had referred the bid to the independent committee overseeing the merger process.
The latest bid comes after MCC rejected an offer from NexPoint Advisors, which the latter claimed would save or create $225 million in value, to rival the MCC management-backed merger plan. NexPoint’s bid involves the merger of MCC into Sierra, but excluded Medley Management (MDLY) entirely, and would place the new entity under NexPoint’s management.
“We elected to make our offer public to give the Medley Board and shareholders another option they may consider in conjunction with either the Sierra Merger or the NexPoint proposal, or separately,” Origami managing partner Jeffrey Young wrote in a letter to shareholders. “Our offer presents shareholders an opportunity to receive cash now at a higher value than that offered by either the Sierra or NexPoint options for the Medley SBIC.”
MCC was scheduled to hold a shareholder meeting on 8 February but it was delayed until early March, which the BDC’s leadership said was a result of last month’s US government shutdown.
A day before the postponement, MCC and Sierra said they would officially decline a merger bid for MCC and Sierra by NexPoint Advisors.
Sierra and MCC management said they had declined the proposal because they found it to be misleading to the BDCs’ shareholders, and they thought it deprived their investors of value that could be found in the original proposal.
The MCC-backed proposal has encountered vocal opposition, including from hedge funds FrontFour Capital Group and Roumell Asset Management.
MCC provided an update in its Tuesday earnings release, noting that the transaction is expected to close in the first three months of the year and that, post-merger, the firm would increase its dividend from $0.05 a share, the level for the current quarter, to $0.133 a share.
The firm posted an $0.18-a-share loss in the fourth quarter, resulting from $0.03-a-share net investment income and a $0.21-a-share net realized and unrealized loss. The firm has posted earnings per share losses seven of the last eight quarters. The firm originated $39.1 million in loans in the fourth-calendar-quarter.