CHARLOTTE, N.C.
and PURCHASE, N.Y., Aug. 10,
2020 /PRNewswire/ -- Barings BDC, Inc. (NYSE: BBDC)
("Barings BDC") and MVC Capital, Inc. (NYSE: MVC) ("MVC Capital")
announced today that they have entered into a definitive merger
agreement under which MVC Capital will merge with and into Barings
BDC (the "Transaction"). The combined company, which will remain
externally managed by Barings LLC, is expected to have more than
$1.2 billion of investments on a pro
forma basis. The boards of directors of both companies, the MVC
Capital Strategic Review Committee, the independent directors of
MVC Capital and the independent directors of Barings BDC have
unanimously approved the Transaction, which is expected to close in
the fourth quarter of 2020.
Under the terms of the merger agreement, MVC Capital
stockholders will receive aggregate consideration of approximately
$177.5 million in the form of cash
and stock consideration based on Barings BDC's June 30, 2020 net asset value ("NAV")
representing total book value consideration of $10.01 per fully diluted MVC Capital share. On a
market value basis, based on the closing price of Barings BDC
common stock on August 10, 2020, the
Transaction represents total consideration for MVC Capital
stockholders of $145.5 million or
approximately $8.21 per share, representing a premium of 21%
to MVC Capital's closing price on August 10,
2020.
MVC Capital stockholders will receive 0.94024 Barings BDC shares
for each MVC Capital share, resulting in approximately 16.7 million
newly issued Barings BDC shares, having total value of $170.5 million, or $9.62 per share, based on Barings BDC's
June 30, 2020 NAV of $10.23 per share. In addition, Barings LLC will
pay approximately $7 million in cash,
or $0.39492 per share, directly to
MVC Capital stockholders at closing. Following the Transaction,
Barings BDC's equity base is expected to expand by $170 million and Barings BDC stockholders and MVC
Capital stockholders are expected to own approximately 74.2% and
25.8%, respectively, of the combined company. The total value of
the consideration to be received by MVC Capital stockholders at
closing is subject to adjustment as set forth in the merger
agreement and may be different than the estimated total
consideration described herein depending on a number of factors,
including the number of outstanding shares of Barings BDC and MVC
Capital common stock, the payment of tax dividends by MVC Capital,
undistributed investment company taxable income and undistributed
net capital gains of MVC Capital and changes of the Euro-to-U.S.
dollar exchange rate relating to certain of MVC Capital's
investments between April 30, 2020
and the closing date.
In addition, Barings LLC will enter into a credit support
agreement ("CSA") with Barings BDC, for the benefit of the combined
company, to protect against net cumulative unrealized and realized
losses of up to $23.0 million on the
acquired MVC investment portfolio over the next 10 years.
Barings BDC will also provide up to $15.0
million in secondary-market support via accretive share
repurchases over a 12-month period in the event the combined
company's shares trade below a specific level of NAV per share
following the completion of the first quarterly period ended after
the consummation of the Transaction, subject to covenant and
regulatory constraints (including Rule 10b-18 under the Securities Exchange Act of
1934).
Barings BDC has agreed that, on the closing date, it will
increase the size of its board of directors and cause one current
member of the board of directors of MVC Capital, to be mutually
selected by MVC Capital and Barings BDC to be appointed to the
Barings BDC board of directors.
In connection with the closing of the proposed Transaction, MVC
Capital will repay all outstanding amounts under its existing
credit facilities and any remaining obligations thereunder will be
terminated. In addition, in connection with the closing of the
proposed Transaction, Barings BDC intends to redeem MVC Capital's
6.25% senior notes due November 30,
2022 (NYSE: MVCD) with an aggregate principal amount
outstanding of $95.0 million.
Barings BDC believes that the increased size and scale of the
combined company will create many strategic and financial benefits
and will position the combined company to capitalize on favorable
market conditions. Including the financial support provided by
Barings LLC, it is anticipated that the combination will provide
the following benefits:
- Increased scale: the combined company is expected to
have more than $1.2 billion of
investments on a pro forma basis;
- Earnings accretion: Barings BDC estimates net investment
income per share to be $0.18 -
$0.20 in the first full quarter
post-closing compared to $0.14 per
share during the second quarter of 2020;
- Investment "option" value: through an expanded equity
base, the combined company is expected to have increased leverage
and investment capacity, and improved access to unsecured debt
capital markets;
- Manager and stockholder alignment: through the upfront
cash payment to MVC Capital's stockholders in connection with the
Transaction and use of the CSA;
- Efficiencies and portfolio diversification: through cost
synergies and an increase in portfolio obligors; and
- Expected accretion to long-term NAV: as acquired assets
are realized and repositioned into directly originated
investments.
Additionally, Barings LLC will seek to amend its current
investment management agreement with Barings BDC to, among other
things, (i) lower the base management fee to 1.25%, down from
1.375%, (ii) make certain conforming and definitional changes
relating to the Transaction, and (iii) reset the incentive fee cap
commencement date to coincide with the first quarterly period
ending after the closing of the Transaction. These proposed changes
to the investment management agreement are subject to Barings BDC
board and stockholder approvals. However, such approvals are not
closing conditions required to consummate the Transaction.
"The increasing benefits of alignment, scale, diversification,
and investment optionality are likely to drive improved shareholder
returns over the long-term and in this period of market
dislocation," commented Eric Lloyd,
Chief Executive Officer of Barings BDC. "We believe this
transaction materially enhances Baring BDC's platform scale while
also providing earnings accretion and portfolio diversification,
while continuing our philosophy of strong shareholder
alignment."
"We believe that Barings' robust global scale and wide frame of
investment reference, combined with MVC Capital's underlevered
equity base, will allow us to complement MVC Capital's existing
portfolio with additional directly-originated investments and
generate improved risk-adjusted returns for shareholders," said
Jonathan Bock, Chief Financial
Officer of Barings BDC. "We remain confident in our ability to
drive platform scale, combined shareholder earnings accretion, and
long-term value for both Barings BDC and MVC Capital
shareholders."
"We are pleased to merge with Barings BDC as we believe that the
combination of the complementary portfolios together forming a
larger-scale BDC with increased investment capacity and portfolio
diversification will offer all shareholders a strong platform for
long-term growth," said Michael T.
Tokarz, Chairman and Portfolio Manager of MVC Capital. "MVC
has made significant progress in transitioning to a yield-focused
BDC, building its net operating income over the past few years. Our
success makes this an opportune time to enjoy greater scale, cost
synergies and continued shareholder alignment."
Leon Cooperman, Wynnefield
Capital, Inc. and West Family Investments, Inc., who collectively
account for approximately 25% ownership interest in MVC Capital,
have entered into voting agreements that require them to vote their
MVC Capital shares in favor of the Transaction subject to terms of
such agreements. Randy Rochman, CEO
of West Family Investments, said in a statement, "The key to
running a successful BDC is putting yourself in a position to be
'highly aligned' to generate attractive shareholder returns, and
Barings has a history of doing just that. This combination allows a
continuation of this practice due to the underlevered nature of the
combined entity, at a time when very attractive financing deals are
being offered. The breadth and scope of the global sourcing by
Barings is a huge advantage in sourcing these very attractive
risk-adjusted opportunities."
Mr. Cooperman, founder of Omega Advisors, Inc. strongly supports
the Transaction and said in a statement, "We are pleased with the
result and thank the board of MVC Capital for its hard work and
success in delivering an excellent outcome for shareholders. We
believe this transaction represents strong shareholder alignment
and provides the best path forward."
Consummation of the Transaction is subject to Barings BDC and
MVC Capital stockholder approval, customary regulatory approvals
and other closing conditions.
J.P. Morgan served as sole financial advisor and Dechert LLP
served as legal counsel to Barings BDC. JMP Securities served as
financial advisor and Kramer Levin
Naftalis & Frankel LLP served as legal counsel to MVC
Capital.
Conference Call to Discuss the Transaction
Barings BDC has scheduled a conference call to discuss the
Transaction for Tuesday, August 11,
2020, at 11:00 a.m. ET.
To listen to the call, please dial 877-407-8831 or 201-493-6736
approximately 10 minutes prior to the start of the call. A taped
replay will be made available approximately two hours after the
conclusion of the call and will remain available until August 25, 2020. To access the replay, please
dial 877-660-6853 or 201-612-7415 and enter conference ID
13708135.
This conference call will also be available via a live webcast
on the investor relations section of Barings BDC's website at
https://ir.barings.com/ir-calendar. Access the website 15 minutes
prior to the start of the call to download and install any
necessary audio software. An archived webcast replay will be
available on Barings BDC's website until August 25, 2020.
A copy of the presentation that will be discussed during the
call is available on the investor relations section of Barings
BDC's website at https://ir.barings.com/presentations.
MVC-G
Forward-Looking Statements
This press release contains, and statements made on the
webcast/conference will contain, "forward-looking statements,"
which are statements other than statements of historical facts, are
not guarantees of future performance or results of Barings BDC, MVC
Capital, or, following the Transaction, the combined company, and
involve a number of risks and uncertainties, including statements
regarding the completion of the proposed Transaction. Such
forward-looking statements may include statements preceded by,
followed by or that otherwise include the words "may," "might,"
"will," "intend," "should," "could," "can," "would," "expect,"
"believe," "estimate," "anticipate," "predict," "potential," "plan"
or similar words. Actual results 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 filings
made by Barings BDC or MVC Capital with the Securities and Exchange
Commission ("SEC"), including those contained in the Proxy
Statement (as defined below), when such documents become available.
Certain factors could cause actual results and conditions to differ
materially from those projected, including the uncertainties
associated with (i) the timing or likelihood of the Transaction
closing, (ii) the expected synergies and savings associated with
the Transaction, (iii) the expected elimination of certain expenses
and costs due to the Transaction, (iv) the percentage of MVC
Capital's stockholders voting in favor of the Transaction, (v) the
percentage of Barings BDC's stockholders voting in favor of the
relevant Proposals (as defined below), (vi) the possibility that
competing offers or acquisition proposals for MVC Capital will be
made; (vii) the possibility that any or all of the various
conditions to the consummation of the Transaction may not be
satisfied or waived; (viii) risks related to diverting the
attention of Barings BDC's management or MVC Capital's management
from ongoing business operations, (ix) the risk that stockholder
litigation in connection with the Transaction may result in
significant costs of defense and liability, (x) the future
operating results of the combined company or Barings BDC's, MVC
Capital's or the combined company's portfolio companies, (xi)
regulatory approvals and other factors, (xii) changes in regional
or national economic conditions, including but not limited to the
impact of the COVID-19 pandemic, and their impact on the industries
in which Barings BDC and MVC Capital invest, (xiii) changes to the
form and amounts of MVC Capital's tax obligations, (xiv) changes in
the Euro-to-U.S. dollar exchange rate, (xv) fluctuations in the
market price of Barings BDC's common stock, (xvi) the Transaction's
effect on the relationships of Barings BDC or MVC Capital with
their respective investors, portfolio companies, lenders and
service providers, whether or not the Transaction is completed,
(xvii) the reduction in Barings BDC's stockholders' and MVC
Capital's stockholders' percentage ownership and voting power in
the combined company, (xviii) the challenges and costs presented by
the integration of Barings BDC and MVC Capital, (xix) the
uncertainty of third-party approvals, (xx) the significant
Transaction costs, (xxi) the restrictions on Barings BDC's and MVC
Capital's conduct of business set forth in the definitive merger
agreement and (xxii) other changes in the conditions of the
industries in which Barings BDC and MVC Capital invest and other
factors enumerated in Barings BDC's and MVC Capital's filings with
the SEC. You should not place undue reliance on such
forward-looking statements, which are and will be based upon
Barings BDC management's and MVC Capital management's respective
then-current views and assumptions regarding future events and
operating performance, and speak only as of the date any such
statement is made. Neither Barings BDC nor MVC Capital undertakes
any duty to update any forward-looking statement made herein. All
forward-looking statements speak only as of the date of this
communication.
Additional Information and Where to Find It
This communication relates to a proposed business combination
involving Barings BDC and MVC Capital, along with related proposals
for which stockholder approval will be sought (collectively, the
"Proposals"). In connection with the proposed Transaction, Barings
BDC and MVC Capital plan to file with the SEC and mail to their
respective stockholders a joint proxy statement on Schedule 14A
(the "Proxy Statement"), and Barings BDC plans to file with the SEC
a registration statement on Form N-14 (the "Registration
Statement") that will include the Proxy Statement and a prospectus
of Barings BDC. The Proxy Statement and the Registration Statement
will each contain important information about Barings BDC, MVC
Capital, the proposed Transaction and related matters.
STOCKHOLDERS OF EACH OF BARINGS BDC AND MVC CAPITAL ARE URGED TO
READ CAREFULLY AND IN THEIR ENTIRETY ALL RELEVANT DOCUMENTS FILED
WITH THE SEC, INCLUDING THE PROXY STATEMENT AND THE REGISTRATION
STATEMENT WHEN THEY BECOME AVAILABLE, AS WELL AS ANY AMENDMENTS OR
SUPPLEMENTS THERETO, BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT BARINGS BDC, MVC CAPITAL, THE TRANSACTION AND THE
PROPOSALS. Investors and security holders will be able to
obtain the documents filed with the SEC free of charge at the SEC's
web site at http://www.sec.gov and, for documents filed by Barings
BDC, from the Barings BDC website at http://www.baringsbdc.com or
for documents filed by MVC Capital, from the MVC Capital website at
http://www.mvccapital.com.
Participants in the Solicitation
Barings BDC and MVC Capital and their respective directors,
executive officers and certain other members of management and
employees of Barings LLC, The Tokarz Group Advisers LLC and their
respective affiliates, may be deemed to be participants in the
solicitation of proxies from the stockholders of Barings BDC and
MVC Capital in connection with the Proposals. Information about the
directors and executive officers of Barings BDC is set forth in its
proxy statement for its 2020 annual meeting of stockholders, which
was filed with the SEC on March 10,
2020. Information about the directors and executive officers
of MVC Capital is set forth in its proxy statement for its 2020
annual meeting of stockholders, which was filed with the SEC on
June 10, 2020. Information regarding
the persons who may, under the rules of the SEC, be considered
participants in the solicitation of Barings BDC's and MVC Capital's
stockholders in connection with the Proposals will be contained in
the Proxy Statement and other relevant materials to be filed with
the SEC when such documents become available. Investors should read
the Proxy Statement and Registration Statement carefully and in
their entirety when they become available before making any voting
or investment decisions. These documents may be obtained free of
charge from the sources indicated above.
No Offer or Solicitation
This press release is not, and under no circumstances is it to
be construed as, a prospectus or an advertisement and the
communication of this press release is not, and under no
circumstances is it to be construed as, an offer to sell or a
solicitation of an offer to purchase any securities in Barings BDC,
MVC Capital or in any fund or other investment vehicle. No offer of
securities shall be made except by means of a prospectus meeting
the requirements of Section 10 of the U.S. Securities Act of
1933.
About Barings BDC
Barings BDC, Inc. (NYSE: BBDC) is a publicly traded, externally
managed investment company that has elected to be treated as a
business development company under the Investment Company Act of
1940. Barings BDC seeks to invest primarily in senior secured loans
to private U.S. middle market companies that operate across a wide
range of industries. Barings BDC's investment activities are
managed by its investment adviser, Barings LLC, a leading global
asset manager based in Charlotte,
NC with over $346 billion* of
AUM firm-wide. For more information, visit www.baringsbdc.com.
About MVC Capital, Inc.
MVC Capital (MVC) is a business development company traded on
the New York Stock Exchange that provides long-term debt and equity
investment capital to fund growth, acquisitions and
recapitalizations of companies in a variety of industries. For
additional information about MVC, please visit MVC's website at
www.mvccapital.com.
About Barings LLC
Barings is a $346+ billion* global financial services firm
dedicated to meeting the evolving investment and capital needs of
our clients and customers. Through active asset management and
direct origination, we provide innovative solutions and access to
differentiated opportunities across public and private capital
markets. A subsidiary of MassMutual, Barings maintains a strong
global presence with business and investment professionals located
across North America, Europe and Asia
Pacific. Learn more at www.barings.com.
*As of June 30, 2020
Barings BDC Contacts:
Media Contact:
Cheryl Krauss, Media Relations,
Barings, 980-417-5858, cheryl.krauss@barings.com
Investor Relations:
BDCinvestorrelations@barings.com, 888-401-1088
MVC Capital Contacts:
Investor Relations:
Jackie Rothchild
MVC Capital
914.510.9400
Or
Jeffrey Goldberger / Allison
Soss
KCSA Strategic Communications
212.896.1249 / 212.896.1267
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SOURCE Barings