Elliott Starts Fight to Stop American Capital Spinoff of BDC

  • Activist goes public with 8.4% stake in asset manager
  • Elliott argues against spin in proxy materials, letter

Activist Elliott Management Corp. disclosed a new stake in American Capital Ltd. and started a proxy campaign urging shareholders to oppose the asset manager’s planned spinoff of its BDC unit.

Elliott owns about 8.4 percent of American Capital, according to a filing Monday with the U.S. Securities and Exchange Commission. It created the website www.BetterACAS.com, arguing against the spin, and publicly released a letter to the company’s board.

“We are convinced that the company’s plan to spin out BDC assets into a new business-development company and create a standalone, external asset manager will put valuable assets at risk, serve to entrench management and significantly limit options for future stockholder value creation,” Elliott wrote in the letter.

Elliott criticized management for poor capital deployment, excessive overhead
expenses, and the board for lacking expertise and compensating poor
performance.

In addition to arguing against the spinoff, the firm called for new directors, a strategic review, cost cuts and a review of its portfolio and capital allocation. Such changes could boost American Capital’s share price to more than $23, compared with a closing price Friday of $14.31. The company has a market value of about $3.8 billion.

Elliott, which manages about $27 billion, has focused most of the hedge fund’s U.S. activist campaigns on enterprise software and hardware technology companies. The New York-based firm has sometimes expanded into retail campaigns, including its recent investment in sporting-goods retailer Cabela’s Inc.

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