* Says to declare special dividend of $0.20
* Says to keep 25 to 140 employees of Allied
* Dividend to be declared on date of approval of merger
* Special meeting for vote on merger on March 26
(Adds details from conference call, background, share
March 3 Allied Capital Corp (ALD.N), which is
selling itself to rival Ares Capital Corp (ARCC.O), plans to
declare a special dividend of 20 cents a share if shareholders
approve the merger deal.
Allied's board will declare the dividend, which has already
been cleared by Ares Capital, to shareholders of record on date
of the approval, the companies said in a joint statement.
The company, which has not paid a dividend since the fourth
quarter of 2008, will pay the special dividend from the fee
savings generated by repaying its private notes in full by Jan.
However, on a conference call with analysts and
shareholders, an Allied executive said the company may not be
in a position to pay dividend for the rest of the year and
potentially longer, if the deal with Ares does not go through.
Business development companies are required by regulators
to pay out a certain portion of their taxable income in
Allied, which has been trying to restructure billions of
dollars in debt, said with $570 million in debt maturing next
year, it will need to continue selling assets in order to pay
Allied has divested about $523 million in assets since the
transaction was announced in October last year.
Selling the higher cash generating assets would hurt its
profits and limit its ability to pay dividends, the company
However, the situation could be reversed if the merger with
Ares goes through.
The combined company would have access to debt capital and
equity markets on more favorable terms and increase liquidity,
leading to resumption of dividend payments for Allied
shareholders, the two companies said.
"We expect the transaction will be accretive to our net
asset value and core earnings per share in the first year,"
Ares Capital Chief Executive Michael Arougheti said on the
Ares Capital said it expects about 25 employees from Allied
to join them on a permanent basis, and said many will remain
for a shorter duration to ensure orderly transition.
No executive officer of Allied will continue in that
position upon closing, Ares said.
Allied had earlier shot down a competing bid from Prospect
Capital Corp (PSEC.O), saying the offer was not superior to its
deal with Ares Capital. [ID:nSGE6120LP]
Prospect had said it would pursue all available options,
including going directly to Allied shareholders, if Allied
board declines its offer.
Shares of Allied were up more than 2 percent at $4.52 on
the New York Stock Exchange, while those of Ares were trading
flat at $13.62 on Nasdaq in afternoon trade.
(Reporting by Archana Shankar in Bangalore; Editing by
Aradhana Aravindan and Anil D'Silva)