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'Go shop' period for Medley Capital, Medley Management, Sierra deal begins

Medley Capital Corp. said the "go shop" period as defined in the terms of the deal with Sierra Income Corp. and Medley Management Inc. has already started.

The 60-day period will expire Sept. 27. Medley Capital's special committee retained Houlihan Lokey as its adviser to review proposals from competing companies.

Under the terms of the original deal announced August 2018, Sierra Income will acquire both Medley Capital and Medley Management. Medley Capital shareholders were supposed to receive 0.8050 of a Sierra Income common share for each stock they own, while Medley Management class A stockholders were set to receive 0.3836 of a Sierra Income common stock, $3.44 per share of cash consideration and a special cash dividend of 65 cents per share. Medley LLC unitholders were supposed to have their units converted to Medley Management class A common stock and receive 0.3836 of a Sierra Income common share, $3.44 per share of cash consideration and a special cash dividend of 35 cents per share.

However, the three companies recently agreed to cut the deal terms. Medley Capital stockholders will now receive 0.66 to 0.68 of a Sierra Income common stock, while Medley Management class A stockholders will now receive 0.2668 of a Sierra Income common share per Medley Management class A stock and $2.96 per share of cash consideration. Unitholders of Medley LLC agreed to convert their units into class A common shares of Medley Management and will now receive 0.2072 of a Sierra Income common share per Medley Management class A stock and $2.66 per share of cash consideration.

If the deal pushes through, Sierra Income would become the seventh-largest publicly traded business development company.

Other companies have stepped in, claiming to have better terms. NexPoint Advisors LP and Marathon Asset Management LP have each offered to be Medley Capital's external investment adviser, pointing out various negatives in the existing agreement.

The Court of Chancery of the State of Delaware in March had ruled Medley Capital's board breached their fiduciary duties in entering into the deal, but it also rejected plaintiffs' arguments that Sierra Income aided the directors in the matter. The court also denied the plaintiffs' request to permanently enjoin the proposed deal.