MCG Capital Is Said to Terminate Efforts to Find Acquirer; Shares Decline
MCG Capital Corp. (MCGC), a lender to small businesses, halted efforts to find a buyer, said two people with knowledge of the matter.
The Arlington, Virginia-based company may still try to sell itself later on, said one of the people, who spoke on the condition of anonymity because the talks are private. MCG, which had a market value of about $448 million as of yesterday’s close, had hired Stifel Financial Corp. to help find a buyer and solicited interest from rival business development companies, or BDCs, people familiar with the situation said last month.
MCG, led by Chief Executive Officer Steven Tunney, has traded at less than the company’s net asset value for the past three years, limiting its ability to grow through the sale of new stock. Excluding a rights offering, MCG hasn’t sold new shares in four years as rivals such as Ares Capital Corp. (ARCC), Apollo Investment Corp. (AINV) and Prospect Capital Corp. tapped public markets.
“The sale may have halted because management believed there was more upside in MCG and was unwilling to take too steep of a discount,” said Michael Turner, an analyst at Compass Point Research & Trading LLC in Washington. “The company doesn’t have a liquidity problem and didn’t have to sell but as a BDC it needs to be able to raise equity to grow.”
Tunney didn’t respond to phone and e-mail messages seeking comment, nor did Sarah Anderson, a spokeswoman for Stifel.
Business development companies manage closed-end funds that invest in the debt and equity of small businesses. They get tax advantages from a 1980 U.S. law that created them, meant to encourage the growth of small companies. Many BDCs are managed by private-equity firms such as Apollo Global Management LLC.
MCG fell 20 cents, or 3.4 percent, to $5.61 as of 1:52 p.m. New York time on the Nasdaq Stock Market. The stock has dropped 17 percent this year through yesterday.