You do realize that Skadden, Arps, Slate, Meagher & Flom LLP are the hired guns by ACAS to oversee this deal?
At the end of the first quarter they fair valued ACAM, the manager of all things ACAS, at $1,033 million and their cost at $636 million. AGNC payed $562 million for what is now being labeled as ACMM.
Management spent $2 B over 5 years because buying back their own work was the best deal for shareholders. So why is ACMM valued at $562 million? Either ARCC is getting an extremely cheap deal at $14.95 per share for real assets or AGNC is underpaying.
ARCC is not buying the whole company.
Management (AGNC) should pony up another .50 per share to their own shareholders. They received large option grants and never brought this company's share price any closer than 75% of NAV, seveal dollars of that was are own money from the buyback. At least they should match the buyback dollars with the AGNC deal.
At the close of the entire deal, so the soonest would be late 2016 to mid 2017. This info has been posted several times now.
All shares and cash are transferred at the final day.
As posted above, it seems that ACAS management does not need share holder approval to create and sell ACMM to AGNC.
So how does this work if shareholders ( ARCC or ACAS) object to the merger or some other snafu occurs and this ACMM and AGNC deal is consummated this quarter? Noted that the ACAS shareholder does not receive cash until the final closing of the entire merger, but AGNC will need to secure the loans and or cash to proceed.
Does the deal between ACAS and AGNC go through regardless?
According to the 425 filing Q & A on schedules, quote:
Q. What are the conditions that need to be satisfied before the ARCC/ACAS merger can close?
A. here are several conditions, including two significant requirements. One is that the sale of ACMM must close. The ACMM acquisition agreement provides that the closing of the ACMM sale may occur as early as July 1, 2016, and American Capital Agency Corp., the purchaser of ACMM, has said that it expects the closing to occur in the third quarter of 2016.
The second significant requirement is that ARCC and ACAS shareholders must approve the ARCC/ACAS merger and ARCC common stock issuance, as the case may be, at ARCC and ACAS shareholder meetings. In preparation for those meetings, ARCC and ACAS will jointly draft a proxy statement for delivery to their shareholders, which will explain the matters to be voted upon at each company’s shareholder meeting. The proxy statement will also serve as a registration statement for the shares of ARCC common stock to be issued to ACAS shareholders in connection with the ARCC/ACAS merger. The ARCC/ACAS merger agreement provides that ARCC and ACAS will each use their reasonable best efforts to file the proxy and registration statement with the SEC by July 8, 2016. After it is filed, the SEC staff will review the proxy and registration statement and can be expected to make comments. It is difficult to predict the length of the SEC staff review process, but it can be expected to last at least one month. After the SEC staff review is complete, the dates of the shareholder meetings will be set and the proxy statement will be distributed to ARCC and ACAS shareholders. It can be expected that the meetings will be held about 50 to 60 days after the SEC review is complete.
Other conditions to closing the ARCC/ACAS merger include obtaining a limited number of third party consents to the ARCC/ACAS merger.
Taken directly from form 425, filed with the SEC on 6/8:
Q. When will the ACMM consideration be paid to ACAS shareholders?
A. The ACMM consideration of approximately $2.45 per share of ACAS common stock will be paid to ACAS shareholders at the closing of the ARCC/ACAS merger. The ACMM consideration is part of the merger consideration and will be paid to ACAS shareholders upon the payment of the merger consideration.
Getting AGNC to pony up some more cash would avoid any interaction from ARCC. Of course there AGNC shareholders will need to agree to this deal as well.
At this point ACAS would need the consent of ARCC. That would be considered to have a material effect on the value of ACAS.
There would need to be an amendment to the contract.
Pressure from Elliot and other large owners would do the trick. I am surprise Elliot Inc gave the 17.40 their blessing. Their figured the ACAS would be valued at $23 or more, so why sign off at under $18.00?
We do not need a law suit but we do need a full accounting of how $17.40 after spending two billion on a buyback is justified.
Using broad strokes,
The picture painted by management to justify the buyback was the discounted share price of our own company is the best deal we can "invest" in. That was start of the bb and continued through the last 5 years. They spent just over 2 billion dollars on that "investment". Using the count of shares outstanding in 2011, which stood around 314 million, the buyback would of paid a $6.37 divvy. The 2 billion instead bought an 3.19 increase of NAV . To this day the NAV has never reach parody with the share price.
The NAV , at the end of the first quarter 2016 close enough to call it $20.00 per share ( they exercised options and bought back some more shares in April and May so the share count used for the acquisition stands at 230 million shares)
Arcc/ARES is putting up $14.95 between cash and shares or $3,438,500 Billion, which We must assume is the best our managers can get for the tangible asset. ARCC did not want the managers so AGNC ( which is totally managed by ACAS) will buy these employees for $562 million or the $2.45 per share. Combined we will receive 17.40 or $2.60 shy of actual NAV.
ARCC is buying the assets at 3.4s B, regardless of the share count, so this brings me back to the $6 .37 we could of received without the buyback, which in my opinion failed to do what it was meant to do. The bb added 3.14 to Nav take that away from todays NAV and it ends up at $16.86 or .54 cents less than the buyout. We would of done much better with a divvy over the last 5 years. ARCC buyout $14.95 plus the cash spent on the BB of 6.37 equals 21.23 per share.
I think management owes us more, so either credit us back some of the options they took or at a minimum absorb another $1.50 per share or so by leveraging AGNC's cash payment on the manager buyout.
By the way , the entire buyback program cost us $2,015,400 billion dollars for 3.19 increase of NAV. With out the buyback we all would of all received about $6.32 per share ( at 314 million OS as of 2011) ib divvy payments.
Add that 3.19 to the ARCC offer 14.95 +3.19 = 18 .14 + the 2.45 = 20.59. I think Management should up the the AGNC offer another $1.50.
Between ARCC and ARES they are paying a combined cash and share total of $14.95. AGNC shareholders are putting $2.45 for ACMM ( basically the employees).
So why is ACMM not worth another $1 to $2 a share? Management has been valuing their own worth at close to a billion dollars for years now they put the worth around $563 million.