TPG Specialized Financing (NYSE: TSLX) announced that it has made a proposition to acquire TICC Capital Corp. (Nasdaq: TICC) in a stock-for-stock transaction. TSLX believes that the proposed deal would deliver an immediate and significant premium to TICC stockholders and significant long-lasting value to shareholders of both companies.Under the regards to
the non-binding proposition delivered to the Unique Committee of TICC’s Board of Directors on September 10, 2015, TICC stockholders would get a variety of shares of TSLX common stock that leads to TICC stockholders getting $7.50 in value per share since the signing date of a definitive contract, representing around a 20 % premium to TICC’s closing stock cost on September 15, 2015. After offering impact to the proposed deal, TICC investors would have the chance to participate in the future value development of an industry-leading platform.In addition to the
considerable up-front premium to TICC shareholders, vital elements of the proposition consist of: ACCRETIVE TO WEB ASSET VALUE-The mix would be instantly accretive to net possession value per share and is anticipated to drive greater return on equity over time.PROVEN TRACK RECORD -TSLX has a proven track record of providing remarkable returns and stable dividends to shareholders. In 2014, TSLX produced overall returns of 14.7 % compared to the sector average of -7.5 %. TSLX has grown net possession value per share from$14.06 after organizational expenses to$15.84 since June 30, 2015. INCREASED LIQUIDITY -TICC shareholders would take advantage of enhanced liquidity, by having shares in a combined company having a pro forma market capitalization potentially in excess of$1.3 billion, as compared with TICC’s present market capitalization of roughly$ 380 million.CONSISTENT AND STEADY DIVIDEND – TSLX believes business development business need to keep consistent dividends that are well covered by net investment earnings. TSLX has made per share net investment income1 in excess of its dividend every year since its inception. It is anticipated that TSLX will continue its existing dividend policy and, to the extent it is effectivesucceeds in rotating the TICC portfolio into higher yielding investments as explained listed below, this policy would lead to shareholders taking pleasure in enhanced dividends.PROVEN CAPABILITY TO CREATE RETURN ON EQUITY FOR SHAREHOLDERS -TICC stockholders would gain from TSLX’s ability to create market leading return on equity for stockholders. In 2014, TSLX generated approximately a 13 % return on equity based upon net financial investment earnings compared to an industry return of around 9 % offered its capability to come from high
proposal for an equally beneficial transaction that would create substantial returns for shareholders of both organizations, instead of rewarding external managers. We thinkOur company believe that a core part of the value embedded in our offer is our industry-leading governance viewpoint. We are amongst a choose group of individuals in the BDC sector that puts investors first and, as a result, we deliver best-in-class returns. In fact, TSLX provided total returns of 14.7 % while the sector
average was -7.5 % in 2014.”We are disappointed that TICC’s Special Committee rejected our proposal so quickly and has actually refused to engage substantively with us. However, we stay fully committed to making this mix a fact and will certainly continue to pursue opening the value inherent in the proposal for both business ‘stockholders.”We agree with NexPoint that shareholders must turn down the Advantage Street Partners proposal. However, the NexPoint proposal is equally flawed as both deals provide returns only for external supervisors and provide no immediate value to stockholders. This focus on fees for an external supervisor remains in sharp contrast to the in advance 20 % premium and long-term value production potential that our proposition provides to the long-suffering TICC investors.”Goldman, Sachs Co. is working as financial advisor and Cleary Gottlieb Steen Hamilton LLP is working as legal advisor to TSLX.The complete text of the letter delivered to the Special Committee of TICC’s Board of Directors by TSLX on September 10, 2015 is included below.The Special Committee of the Board of DirectorsTICC Capital Corp. 8 Noise Coast Drive, Suite 255Greenwich, CT 06830 Attention: Mr. Steven P. Novak, Chairman Dear Steve: Thank you for the chance to speak with you earlier today. As we went over, we at TPG Specialized Loaning, Inc.(“TSLX” )have viewed the recent events regarding the future of TICC Capital Corp. (” TICC “)with significant interest. After a fantastic deala good deal of consideration and analysis, we feel strongly that a combination of our two businesses would be in our shared interests as it will deliver an instant and substantial premium to your investors while providing a clear course to long-term
value production for shareholders of both organizations.We are for that reason delighted to propose a deal in which TICC would merge with a wholly owned subsidiary of TSLX,
and each outstanding share of TICC typical stock would be converted into the right to get a variety of shares of TSLX common stock that results in TICC investors
receiving$7.50 in value per share as of the signing date of a conclusive arrangement, standing for a 20 % premium to the undisturbed trading rate of TICC’s typical stock as of August 3, 2015. Conversely, we would also be open to discussing with you a transaction where TICC investors receive a combination of cash and shares of TSLX common stock for their TICC stock.We understand TICC’s recent choice to get inbecome part of a new financial investment advisory contract with TICC Management, LLC in connection with the acquisition of TICC Management, LLC by an affiliate of Benefit Street Partners LLC.(“Advantage Street Partners”).
We feel strongly, and think your shareholders will too, that our alternative offer is far superior to a proposal to replace the existing financial investment advisory arrangement given the immediate and extremely engaging value it offers to TICC stockholders.TSLX is a specialized finance business concentrated on providing versatile, completely dedicated funding solutions to middle market companies principally located in the United States. We partner with companies throughout a range of markets and stand out at providing innovative options to business with complex business models that might have restricted access to capital. Comparable to TICC, we are a company development business and are externally handled by TSL Advisers, LLC, an SEC-registered financial investment adviser.As detailed in the attached appendix, our business is highly distinguished by our capability to take advantage of the deep financial investment, sector, and operating resources of TPG Unique Circumstances Partners(“TSSP” ), the devoted unique circumstances and credit platform of TPG, with over$12 billion of assets under management, and the broader TPG platform, a global private financial investment firm with over $74 billion of assets under management.We have the knowledge and experience to be an excellent steward of TICC’s profile. Though we intend to rotate TICC’s possessions
into higher value added investments concentrated on illiquid personal credit, we have a deep understanding of liquid credit investments and CLO equity financial investments. TSSP manages investment automobiles that hold over$ 2.0 billion of comparable assets and handles four active CLOs.Further, among company development companies, TSLX has among the largest proportions of institutional shareholders. We aimpursue openness with financiers and have a tested track record of go back to our shareholders. Last year, we generated overall returns of 14.7 % compared with the sector average of -7.5 %.2 We have over-earned our dividend on a net investment earnings per share basis every year given that our creation, while growing net asset value per share from$14.06 after organizational expenses to $15.84 as of June 30, 2015. Since June 30, 2015, our profile had a reasonable value of approximately $1,398 million invested throughout 40 profile companies.A mix with TSLX offers clear benefits to the existing propositions to change TICC’s current
investment advisory contract: First, TICC investors would have the ability to exchange their shares at a 20 % premium to the undisturbed trading cost of TICC’s common stock as of August 3, 2015. Second, after giving impact to our proposed deal, TICC investors would delight in the benefits under TSLX’s financial investment advisory agreement of a highly competitive management cost of 1.5 % and a consultant incentive charge of
17.5 % over a 6 % difficulty rate.Third, TSLX has a tested track record of providing superior returns to stockholders and of stable dividends. Not only has TSLX over-earned its dividend on net investment income every year since inception, but its dividend has been steady since TSLX went public in March 2014. Our stock-for-stock proposal offers TICC investors with the alternative to participate in this shown long-lasting development and to buy less available illiquid possessions that have exceptional risk return, while gaining from a market-leading expense structure that drives return on equity for stockholders.Fourth, as a result of our proposed transaction, TICC investors would take advantage of increased liquidity, by having shares in a combined company having a pro forma market capitalization possibly in excess of$1.3 billion,
- as compared to TICC’s existing market capitalization of roughly $415 million.In amount, any proposal focused entirely on changing TICC’s current financial investment advisory contract can not provide the considerable and concrete advantages of the substantial and immediate up-front premium we are offering, nor the enhanced liquidity and opportunity for long-lasting growth offered by our proposal.TSLX has an eager interest in value being provided to TICC investors, as we currently own roughly 3
- % of TICC’s exceptional common stock. These shares are eligible to vote at the special conference of stockholders to be held on October 27, 2015 to authorize the brand-new financial investment advisory contract. More typically, we are dedicated to fostering a culture of durable business governance. We seek transparency and to put investors first, as provened by, amongst other things, our selective capital raising efforts and continuous stock redeemed programs.While we believeour team believe that our proposition is a full and reasonable one, we note that it is based exclusively on openly offered details and our knowledge of the industry.
- We would welcome the opportunity to acquire a much deeper understanding of TICC and the resulting advantages of a mix with TSLX by carrying out confirmatory due diligence of a customary nature. In connection with our proposal, we have actually retained Goldman, Sachs Co. as our financial consultant and Cleary Gottlieb Steen Hamilton LLP as our legal consultant.
We and our consultants are prepared to obtain begun instantly on confirmatory due diligence and the negotiation of suitable conclusive arrangements, and think that, with your cooperation and support, we can finish the process very promptly.Given the premium our proposition offers for TICC’s shares, we trust that the Special Committee will certainly offer it mindful consideration. We look forward to hearing from you immediately, and stand prepared and eagereager to without delay engage in discussions and resolve any concerns or concerns you may have. We also reserve the right to publicly reveal this letter and to take other steps in furtherance of our proposal.As we make certain you can value, our proposal is also subject, amongstto name a few things, to the settlement and execution of mutually appropriate conclusive agreements. Appropriately, this letter does not constitute or develop any dedication, task or other binding responsibility or restriction on the
part of any individualanybody in any respect. Just those commitments stated in conclusive contracts will be binding upon the parties.We hope you will certainly be as thrilled as we have to do with this deal, and we look forward to discussing it with you.Very truly yours, Joshua EasterlyChairman, Board of DirectorsCo-Chief Executive Policeman Michael FishmanCo-Chief Executive Officer Appendix A TPG Unique Circumstances Partners (“TSSP”)is a multi-asset class credit and special situations financial investment platform, managing over $12 billion in assets as of June 30, 2015 throughout middle market direct loan origination, syndicated leveraged loan, unique situations and distressed financial investment techniques. Since July 31, 2015, TSSP had 133 specialists running from offices in San Francisco, New york city, London, Dallas, and Fort Worth. TSSP was formed in 2009 as the devoted credit and unique circumstances platform of TPG Capital( “TPG “)and presently incorporates: TPG Specialty Loaning (” TSLX”), a NYSE-listed business development company focused mostly on straight originating loans to US-domiciled middle market companies; TPG Institutional Credit Partners(” TICP” ), which is a public-side credit investment platform concentrated on investment opportunities in extensively
syndicated leveraged loan markets; TPG Specialized Loaning Europe, which is aimedtargeted at European middle-market loan originations; TPG Opportunities Partners and TPG Adjacent Opportunities Partners, which invest in special situations and distressed financial investments throughout the credit cycle; and Austin Credit Macro, which is concentrated on macro credit opportunities.From beginning in July 2011 through June 30, 2015, TSLX has actually come from more than $3.7 billion aggregate primary amounts of financial investments and presently handles a profile of around$1.4 billion at fair value as of June 30, 2015.
From beginning through
June 30, 2015, TSLX has created 16.4 % gross unlevered returns
on more than$900 million of realized financial investments. TICP, which started operations in October 2013, presently manages 4 CLOs with overall CLO possessions under management of over$ 2.0 billion as of June 30, 2015. TPG is among the biggest alternative possession financial investment firms worldwide. Given that its founding in 1992, TPG has focused on buying alternative possessions, including personal equity, growth equity, endeavorequity capital, public equity and genuineproperty and presently manages over $74 billion in possessions. Collectively, TSSP and TPG have more than 814 staff members running from 17 workplaces throughout North America, South America, Europe, and Asia.