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Information Relating to ARCC’s Recent Acquisition of ACAS
- What was the structure of the transactions?
On May 23, 2016, Ares Capital Corporation ("ARCC"), American Capital, Ltd. ("ACAS"), Orion Acquisition Sub, Inc. ("Acquisition Sub"), a wholly owned subsidiary of ARCC, Ivy Hill Asset Management, L.P. ("IHAM"), a wholly owned portfolio company of ARCC, Ivy Hill Asset Management, GP, the general partner of IHAM, American Capital Asset Management, LLC ("ACAM"), a wholly owned portfolio company of ACAS and solely for the limited purposes set forth therein, Ares Capital Management LLC ("ACM") entered into a definitive merger agreement, providing for the acquisition of ACAS by ARCC through a series of mergers.
Two mergers occurred:
1. Acquisition Sub merged with and into ACAS, with ACAS remaining as the surviving entity in the merger as a wholly owned subsidiary of ARCC.
2. ACAM merged with and into IHAM, with IHAM remaining as the surviving entity in the merger as a wholly owned portfolio company of ARCC.
Immediately following the mergers, ACAS converted into a Delaware limited liability company and withdrew its election as a "business development company" (as defined in the Investment Company Act of 1940, as amended).
- What consideration did ACAS stockholders receive in the mergers?
Subject to the terms and conditions of the merger agreement, each share of ACAS common stock issued and outstanding immediately prior to the effective time was converted into the right to receive a combination of cash and ARCC common stock which can be approximately summarized as follows:
Under the terms of the agreement, ACAS shareholders will receive total consideration of approximately $18.06 per share comprised of: (i) $14.41 per share from ARCC consisting of approximately $6.48 per share of cash (including a make-up dividend in the amount of $0.07 per share) and 0.483 ARCC shares for each ACAS share at a value of $7.93 per ACAS share (based on the closing price per share of ARCC common stock on January 3, 2017), (ii) $2.45 per share of cash from ACAS’s previously announced sale of American Capital Mortgage Management, LLC, and (iii) approximately $1.20 per share of cash as transaction support provided by Ares Capital Management, LLC, a subsidiary of Ares Management, L.P. (NYSE: ARES) and the investment adviser to ARCC, acting solely on its own behalf. In connection with the stock consideration, approximately 112.0 million ARCC shares were issued to ACAS shareholders, resulting in ACAS shareholders owning 26.3% and ARCC shareholders owning 73.7% of the combined company as of January 3, 2017. On January 3, 2017, the official close price of ARCC’s common stock on The NASDAQ Global Select Market was $16.42 per share. ACAS shares were delisted from the NASDAQ and trading ceased at the close of trading on January 3, 2017.
- Is the merger expected to be taxable to ACAS stockholders?
Holders of ACAS common stock should consult with their own tax advisors to determine the tax consequences of the merger to them. For U.S. federal income tax purposes, ACAS and ARCC will treat the merger as a taxable acquisition of all of the ACAS common stock by ARCC. ACAS stockholders should generally recognize taxable gain or loss (depending on their respective tax basis in their shares) upon the receipt of the ARCC consideration, the make-up dividend amount and the Mortgage Manager consideration. With respect to the Ares Capital Management consideration, there is limited authority addressing the tax consequences of the receipt of merger consideration from a party other than the acquiror and, as a result, the tax consequences of the receipt of the Ares Capital Management consideration are not entirely clear.
- U.S. Stockholders: ARCC, Ares Capital Management and Computershare Inc. ("Computershare") (as ARCC’s transfer agent) intend to take the position that the Ares Capital Management consideration received by a U.S. stockholder (as defined in ARCC’s registration statement and amendments thereto) is treated as additional merger consideration, and, assuming such position is respected, should generally result in additional taxable gain or a smaller loss to such U.S. stockholder. Accordingly, assuming that the Ares Capital Management consideration is treated as additional merger consideration, U.S. stockholders should recognize taxable gain or loss on 100% of the total amount realized in the transactions for U.S. federal income tax purposes.
- Non-U.S. Stockholders: Except as otherwise described in ARCC’s registration statement and amendments thereto, non-U.S. stockholders (as defined therein) generally should not be subject to U.S. tax on the receipt of the ARCC consideration, the make-up dividend amount and the Mortgage Manager consideration. Because of the uncertainty regarding the tax consequences of the receipt of the Ares Capital Management consideration, ARCC, Ares Capital Management and Computershare (as ARCC’s transfer agent), and any other applicable withholding agent, intend to withhold U.S. federal income tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty, provided the non-U.S. stockholder furnishes the applicable forms or documents certifying qualification for the lower treaty rate) from the Ares Capital Management consideration received by a non-U.S. stockholder.
- If I am an ACAS stockholder, how can I exchange my shares?
At the effective time, each share of ACAS common stock issued and outstanding immediately prior to the effective time was converted into the right to receive the merger consideration (excluding dissenting shares, treasury stock and shares held by ARCC). Each such share of ACAS common stock is no longer be outstanding and will be automatically canceled and cease to exist, with the holders of such shares ceasing to have any rights with respect to any ACAS common stock other than the right to receive the merger consideration upon the surrender of such shares of ACAS common stock in accordance with such stockholder's letter of transmittal:
- As promptly as practicable after the effective time, but in any event within two business days, the exchange agent will mail to each record holder of ACAS common stock a letter of transmittal and instructions for use in effecting the surrender of certificate(s) or book-entry shares in exchange for the merger consideration and, without interest, cash instead of fractional shares and any dividends or other distributions declared after the effective time with respect to shares of ARCC common stock. Delivery will only be effected, and risk of loss and title to certificate(s) and book-entry shares will only pass, upon delivery of such certificate(s) (or affidavits of loss in lieu of such certificate(s)) or book-entry shares to the exchange agent in the manner set forth in such letter of transmittal and instructions.
- Holders of ACAS common stock should not submit their shares of ACAS common stock for exchange until they receive the letter of transmittal and instructions from the exchange agent.
- If a certificate for ACAS common stock has been lost, stolen or destroyed, upon the making of an affidavit by such holder and, if required by ARCC, the posting of a bond in such amount as ARCC may determine is reasonably necessary as indemnity, the exchange agent will issue in exchange for such lost, stolen or destroyed certificate the merger consideration and, without interest, cash instead of fractional shares and any dividends or other distributions declared after the effective time with respect to shares of ARCC common stock.
- Shares of ARCC common stock will be issued in book-entry (i.e., uncertificated) form only. No physical certificates will be issued in connection with the merger. In lieu of physical certificates, the exchange agent will send to each person who has surrendered shares of ACAS common stock, together with a properly completed transmittal letter, a confirmation containing the information required under Maryland law regarding the ARCC common stock issued to such person, including the name of the issuer (ARCC) and the number of shares of ARCC common stock issued.
- ARCC, Ares Capital Management and the exchange agent will be entitled to deduct and withhold from any amounts payable to any ACAS stockholder such amounts as each determines is required to be deducted and withheld with respect to the making of such payment under applicable tax laws. If any amounts are withheld, these amounts will be treated as having been paid to the stockholders from whom they were withheld.
- How can I contact the Exchange Agent?
Computershare Trust Company, N.A.
250 Royall Street
Canton, Massachusetts 02021
Within USA, US territories & Canada 800 546 5141
Outside USA, US territories & Canada 781 575 2765
- Will I receive dividends after completion of the transactions?
ARCC currently intends to distribute quarterly dividends to its stockholders. For a history of the dividends and distributions paid by ARCC since January 1, 2014, see the "Distributions" page on the "Investor Resources" section ARCC’s website. The amount and timing of past dividends and distributions are not a guarantee of any future dividends or distributions, or the amount thereof, the payment, timing and amount of which will be determined by ARCC’s board of directors and depend on ARCC’s cash requirements, its financial condition and earnings, contractual restrictions, legal and regulatory considerations and other factors.
No dividends or other distributions with respect to shares of ARCC common stock will be paid to any former ACAS stockholders who have not surrendered their shares to the exchange agent for shares of ARCC common stock until such shares are surrendered in accordance with such stockholders' letter of transmittal. Following the surrender of any such shares in accordance with such letter of transmittal, the record holders of such shares shall be entitled to receive, without interest, the amount of dividends or other distributions with a record date after the effective time payable with respect to shares of ARCC common stock exchangeable for such shares and not previously paid. ARCC has the right to withhold dividends or any other distributions on shares of ARCC common stock until the ACAS shares are surrendered to the exchange agent.
- How will the combined company be managed?
ARCC is an externally managed closed-end fund. The current directors and officers of ARCC are continuing in their current positions and ARCC’s investment adviser, ACM, continues to externally manage the combined company. The former directors or officers of ACAS are not continuing as directors or officers of the combined company.
Historical ACAS Information
- Where can I find copies of American Capital's SEC filings and financial reports (historical 10Qs, 10Ks, Annual Reports, etc.)?
Please visit the SEC Filings page on our website to see American Capital's historical SEC filings and other financial reports.
- What is the dividend history for American Capital?
The table below provides American Capital's dividend history:
|AMERICAN CAPITAL DIVIDEND HISTORY|
|% Change Over|
|$30.32|| || || || |
|2009||$1.07||Cash and Stock Distribution*||06/18/09||06/22/09||08/07/09|
|2008||$3.09||-17%|| || || |
|2007||$3.72||12%|| || || |
|2006||$3.33||8%|| || || |
|2005||$3.08||6%|| || || |
|2004||$2.91||4%|| || || |
|2003||$2.79||9%|| || || |
|2002||$2.57||12%|| || || |
|2001||$2.30||6%|| || || |
|2000||$2.17||25%|| || || |
|1999||$1.74||30%|| || || |
|1998||$1.34||N/A|| || || |
|1997||$0.21||N/A|| || || |
*On June 11, 2009, American Capital declared a dividend of $1.07 per share payable on August 7, 2009. The dividend included the Company's remaining 2008 taxable income, which was required to be distributed to stockholders prior to September 30, 2009, in order for the Company to maintain its tax status as a regulated investment company and to eliminate its income tax liability, as well as a portion of estimated 2009 taxable income. At the election of each registered stockholder, the dividend was payable either in shares of common stock or cash. Stockholders who elected to receive the dividend solely in shares of common stock and stockholders who did not make an election received 0.332 shares of common stock for each share of common stock they owned on the record date. Stockholders who elected to receive the dividend in cash, received cash in the amount of $0.185 per share or 17% of the $1.07 dividend and 0.275 shares of common stock or 83% of the total dividend for each share of common stock they owned on the record date. The number of shares of common stock comprising the stock portion was calculated based on a price of $3.2199 per share, the volume weighted trading price per share of the common stock on the NASDAQ Global Select Market on July 27, 28 and 29, 2009. For additional information on the August 7, 2009 dividend, please click here.
- Is a dividend from American Capital "qualified"? What is the tax treatment of American Capital dividends?
The majority of American Capital's dividends have historically been non-qualified. Additional details can be found on the Dividends page of the website.
- Does American Capital issue a K-1? What other tax forms should I expect?
No, American Capital does not issue a K-1. American Capital shareholders will receive a Form 1099 including any dividends paid by the Company. In addition, if American Capital opts to retain its long-term capital gains, you will receive a Form 2439. You can read more about these forms on the Dividends and Form 2439 sections of our website.