Marcato Capital Management LP is recommending that Virtus Investment Partners Inc. finance its proposed acquisition of RidgeWorth Investment primarily with cash.
Marcato manages funds that beneficially own common shares of Virtus, according to a news release.
Marcato said the transaction can be significantly more accretive to Virtus' EPS than the 15%-plus guidance currently provided by management if equity dilution is minimized. Also, Marcato noted that, by maximizing the amount of cash and available balance sheet capacity used in the transaction, Virtus can achieve EPS accretion of more than 50%.
Virtus announced the RidgeWorth transaction in December 2016, saying the $513 million deal is expected to be financed using existing balance sheet resources and some combination of debt, equity and equity-linked securities. Morgan Stanley Senior Funding Inc. and Barclays Capital have provided committed debt financing for up to $475 million.