ITEM 1.01. Entry into a Material Definitive Agreement.
Agreement and Plan of Merger
On August 10, 2020, the Fund entered into an Agreement and Plan of Merger (the
"Merger Agreement") among Barings BDC, Inc., a Maryland corporation ("BBDC"),
Mustang Acquisition Sub, Inc., a Delaware corporation and wholly owned
subsidiary of BBDC ("Acquisition Sub"), and Barings LLC, a Delaware limited
liability company and investment adviser to BBDC ("Barings"). The Merger
Agreement provides that, on the terms and subject to the conditions set forth in
the Merger Agreement, Acquisition Sub will merge with and into the Fund, with
the Fund continuing as the surviving company and as a wholly-owned subsidiary of
BBDC (the "First Step") and, immediately thereafter, the Fund will merge with
and into BBDC, with BBDC continuing as the surviving company (the "Second Step"
and, together with the First Step, the "Merger"). The boards of directors of
both BBDC and the Fund, including all of the respective independent directors,
have approved the Merger Agreement and the transactions contemplated therein.
The parties to the Merger Agreement intend the Merger to be treated as a
"reorganization" within the meaning of Section 368(a)(1)(A) of the Internal
Revenue Code of 1986, as amended.
In the First Step, each share of the Fund's common stock issued and outstanding
immediately prior to the effective time of the First Step (excluding any shares
cancelled pursuant to the Merger Agreement) will be converted into the right to
receive (i) $0.39492 per share in cash, without interest, from Barings (such
amount of cash, the "Cash Consideration") and (ii) 0.94024 (such ratio, as may
be adjusted pursuant to the Merger Agreement, the "Exchange Ratio") of a validly
issued, fully paid and non-assessable share of BBDC common stock, par value
$0.001 per share (the "Share Consideration" and together with the Cash
Consideration, the "Merger Consideration"). Pursuant to the Merger Agreement,
total value of the consideration to be received by the Fund's 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 BBDC and the
Fund's common stock, the payment of tax dividends by the Fund, undistributed
investment company taxable income and undistributed net capital gains of the
Fund and changes of the Euro-to-U.S. dollar exchange rate relating to certain of
the Fund's investments between April 30, 2020 and the closing date.
The Merger Agreement contains representations, warranties and covenants,
including, among others, covenants relating to the operation of each of BBDC's
and the Fund's businesses during the period prior to the closing of the Merger.
BBDC and the Fund have agreed to convene and hold stockholder meetings for the
purpose of obtaining the approvals required of BBDC's and the Fund's
stockholders, respectively, and the boards of directors of BBDC and the Fund
have agreed to recommend that their respective stockholders approve the
applicable proposals (as described below).
The Merger Agreement provides that the Fund shall not, and shall cause its
representatives and subsidiaries not to, solicit proposals relating to
alternative transactions, or, subject to certain exceptions, initiate or
participate in discussions or negotiations regarding, or provide information
with respect to, any proposal for an alternative transaction. However, the board
of directors of the Fund may, subject to certain conditions, change its
recommendation to the stockholders of the Fund or, on payment of a termination
fee by the Fund of approximately $2.94 million and the reimbursement of up to
$1.18 million in expenses incurred by BBDC and Barings, terminate the Merger
Agreement and enter into an Alternative Acquisition Agreement (as defined in the
Merger Agreement) for a Superior Proposal (as defined in the Merger Agreement),
if it determines in good faith, after consultation with its outside legal
counsel, that failure to do so would reasonably be expected to be inconsistent
with its fiduciary duties or obligations under applicable law.
Consummation of the First Step, which is currently anticipated to occur during
the fourth quarter of fiscal year 2020, is subject to certain customary closing
conditions, including (1) adoption of the Merger Agreement by a majority of the
outstanding shares of the Fund's common stock, (2) approval of the issuance of
BBDC common stock to be issued in the First Step by a majority of the votes cast
by the BBDC stockholders on the matter, (3) approval of the issuance of BBDC's
common stock in connection with the First Step at a price below the then-current
net asset value per share of BBDC common stock, if applicable, by the vote
specified in Section 63(2)(A) of the Investment Company Act of 1940, as amended,
(4) the absence of certain legal impediments to the consummation of the Merger,
(5) effectiveness of the registration statement for the BBDC common stock to be
issued as consideration in the First Step, (6) approval for listing on the New
York Stock Exchange of the BBDC common stock to be issued as consideration in
the First Step, (7) subject to certain materiality standards, the accuracy of
the representations and warranties and compliance with the covenants of each
party to the Merger Agreement, and (8) required regulatory approvals (including
expiration of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended).
In addition, BBDC and the Fund will take steps necessary to provide for the
repayment at closing of the Fund's credit facilities and the redemption or
assumption of the Fund's 6.25% senior notes due November 30, 2022.
The Merger Agreement also contains certain termination rights in favor of BBDC
and the Fund, including if the First Step is not completed on or before February
10, 2021 or if the requisite approvals of BBDC stockholders or stockholders of
the Fund are not obtained. The Merger Agreement also provides that, upon the
valid termination of the Merger Agreement under certain circumstances, BBDC may
be required to pay or cause to be paid to the Fund a termination fee of
approximately $4.70 million, or the Fund may be required to pay or cause to be
paid to BBDC a termination fee of approximately $2.94 million.
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The description above is only a summary of the material provisions of the Merger
Agreement and is qualified in its entirety by reference to a copy of the Merger
Agreement, which is filed as Exhibit 2.1 to this Current Report on Form 8-K and
incorporated by reference herein.
The representations and warranties and covenants set forth in the Merger
Agreement have been made only for purposes of such agreement and were solely for
the benefit of the parties to the Merger Agreement, may be subject to
limitations agreed upon by the contracting parties, including qualification by
confidential disclosures made for purposes of allocating contractual risk
between the parties to the Merger Agreement instead of establishing these
matters as facts, and may be subject to standards of materiality applicable to
the contracting parties that differ from those applicable to investors.
Accordingly, the Merger Agreement is included with this filing only to provide
investors with information regarding the terms of the Merger Agreement, and not
to provide investors with any factual information regarding the parties to the
Merger Agreement or their respective businesses.
Voting Agreements
Prior to the entry into the Merger Agreement and as a condition to the
willingness of BBDC to enter into the Merger Agreement, Leon G. Cooperman,
Michael T. Tokarz, Wynnefield Capital, Inc. and West Family Investments, Inc.,
stockholders of the Fund which collectively own approximately 31% of the Fund's
common stock issued and outstanding as of the date of the Merger Agreement,
entered into voting agreements with BBDC (collectively, the "Voting
Agreements"), pursuant to which, among other things, such stockholders of the
Fund have, subject to the terms and conditions set forth in the Voting
Agreements, agreed to support the Merger and the transactions contemplated by
the Merger Agreement and to vote all their shares of the Fund's common stock in
favor of the First Step. The Voting Agreements' obligations to vote in favor of
the First Step terminate upon certain events, including the effective time of
the First Step, the valid termination of the Merger Agreement in accordance with
its terms, the termination of the Voting Agreements by mutual consent of the
parties thereto or a change in the recommendation of the Fund's board of
directors to the Fund's stockholders pursuant to the Merger Agreement.
ITEM 7.01. Regulation FD Disclosure.
On August 10, 2020, the Fund and BBDC issued a joint press release announcing
the entry into the Merger Agreement. The joint press release is furnished
herewith as Exhibit 99.1.
The information in Item 7.01 of this Current Report on Form 8-K, including
Exhibit 99.1 furnished herewith, is being furnished and shall not be deemed
"filed" for any purpose of Section 18 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or otherwise subject to the liabilities of such
Section. The information in this Current Report on Form 8-K shall not be deemed
to be incorporated by reference into any filing under the Securities Act of
1933, as amended, or the Exchange Act, except as shall be expressly set forth by
specific reference in such filing.
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Cautionary Statement Regarding Forward-Looking Statements
This Current Report on Form 8-K contains "forward-looking statements," which are
statements other than statements of historical facts, are not guarantees of
future performance or results of BBDC, the Fund, or, following the Merger, the
combined company, and involve a number of risks and uncertainties, including
statements regarding the completion of the proposed Merger. 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 BBDC
or the Fund 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 Merger closing, (ii) the expected synergies and
savings associated with the Merger, (iii) the expected elimination of certain
expenses and costs due to the Merger, (iv) the percentage of the Funds's
stockholders voting in favor of the Merger, (v) the percentage of BBDC's
stockholders voting in favor of the relevant Proposals (as defined below), (vi)
the possibility that competing offers or acquisition proposals for the Fund will
be made; (vii) the possibility that any or all of the various conditions to the
consummation of the Merger may not be satisfied or waived; (viii) risks related
to diverting the attention of BBDC's management or the Fund's management from
ongoing business operations, (ix) the risk that stockholder litigation in
connection with the Merger may result in significant costs of defense and
liability, (x) the future operating results of the combined company or BBDC's,
the Fund'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 BBDC and the Fund invest, (xiii)
changes to the form and amounts of the Fund's tax obligations, (xiv) changes in
the Euro-to-U.S. dollar exchange rate, (xv) fluctuations in the market price of
BBDC's common stock, (xvi) the Merger's effect on the relationships of BBDC or
the Fund with their respective investors, portfolio companies, lenders and
service providers, whether or not the Merger is completed, (xvii) the reduction
in BBDC's stockholders' and the Fund's stockholders' percentage ownership and
voting power in the combined company, (xviii) the challenges and costs presented
by the integration of BBDC and the Fund, (xix) the uncertainty of third-party
approvals, (xx) the significant Merger transaction costs, (xxi) the restrictions
on BBDC's and the Fund's conduct of business set forth in the definitive merger
agreement and (xxii) other changes in the conditions of the industries in which
BBDC and the Fund invest and other factors enumerated in BBDC's and the Fund's
filings with the SEC. You should not place undue reliance on such
forward-looking statements, which are and will be based upon BBDC management's
and the Fund 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 BBDC nor the Fund undertakes any duty to
update any forward-looking statement made herein. All forward-looking statements
speak only as of the date of this Current Report on Form 8-K.
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Additional Information and Where to Find It
This communication relates to a proposed business combination involving BBDC and
the Fund, along with related proposals for which stockholder approval will be
sought (collectively, the "Proposals"). In connection with the proposed Merger,
BBDC and the Fund plan to file with the SEC and mail to their respective
stockholders a joint proxy statement on Schedule 14A (the "Proxy Statement"),
and BBDC 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 BBDC. The Proxy Statement and the Registration Statement will each contain
important information about BBDC, the Fund, the proposed Merger and related
matters. STOCKHOLDERS OF EACH OF BBDC AND THE FUND 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 BBDC, THE FUND, THE MERGER 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 BBDC, from BBDC's website at http://www.baringsbdc.com or for
documents filed by the Fund, from the Fund's website at
http://www.mvccapital.com.
Participants in the Solicitation
BBDC and the Fund 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 BBDC and the Fund in
connection with the Proposals. Information about the directors and executive
officers of BBDC 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 the Fund 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 BBDC's and the
Fund'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 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 Current Report on Form 8-K is not, and under no circumstances is it to be
construed as, a prospectus or an advertisement and the communication of this
Current Report on Form 8-K 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 BBDC, the Fund 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.
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ITEM 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit
No. Description
2.1* Agreement and Plan of Merger, by and among Barings BDC, Inc., MVC
Capital, Inc., Mustang Acquisition Sub, Inc., and Barings LLC, dated as
of August 10, 2020.
99.1 Joint press release of MVC Capital, Inc. dated as of August 10, 2020.
*Exhibits and schedules to this Exhibit have been omitted in accordance with
Item 601(b)(2) of Regulation S-K. The registrant agrees to furnish
supplementally a copy of all omitted exhibits and schedules to the SEC upon its
request.
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