UPDATE 1-Prospect Capital sweetens bid for rival Allied Capital

* Raises offer to 0.40 shares for each Allied share

* Offers 19 pct premium to Allied’s Monday close

* Prospect may go to shareholders if “stiff armed”

* Allied shares up 3 pct

Jan 26 (BestGrowthStock) – Prospect Capital Corp (PSEC.O: )
sweetened its offer to buy rival Allied Capital Corp (ALD.N: ),
after getting snubbed by the small business lender, which
prefers being bought by Ares Capital Corp (ARCC.O: ).

Prospect’s proposal now values the deal at $903.5 million
and offers a 19 percent premium over Allied’s Monday close.

As part of the deal, Prospect Capital agreed to offer 40
cents for each Allied Capital share, up from its previous offer
of 38.5 cents.

“Should the Allied board continue to ‘stiff arm’ us, we are
prepared to pursue all available options, including bringing
the matter directly to Allied shareholders,” Prospect said in a
statement.

In October, Ares Capital agreed to buy Allied Capital in an
all-stock deal valued at $648 million. [ID:nBNG507417]
[ID:nBNG534512]

New York-based Prospect Capital said last November it was
evaluating a pipeline of potential additional portfolio and
investment opportunities and may even consider making a
“hostile offer” to a potential candidate.

Popularly known as BDCs (business development companies),
business lenders make debt and equity investments in small- and
middle-sized companies in return for equity stakes.

They have been struggling to raise capital as the financial
crisis reduced the value of their portfolio companies to which
they make loans.

In morning trade, Prospect Capital’s shares were down 3
percent at $12.23 on Nasdaq, while Allied Capital’s shares were
up 3 percent at $4.34 on the New York Stock Exchange.

Stock Market Analysis

(Reporting by Archana Shankar in Bangalore; Editing by Anil
D’Silva)

UPDATE 1-Prospect Capital sweetens bid for rival Allied Capital