8-K: BlackRock TCP Capital Corp. Addresses Stockholder Concerns with Merger Disclosures

BlackRock TCP Capital Corp. supplements its merger proxy statement following stockholder concerns about misleading information, while reaffirming its recommendation for the merger with BlackRock Capital Investment Corporation.

Summary

• BlackRock TCP Capital Corp. (TCPC) has addressed concerns raised by stockholders regarding the merger with BlackRock Capital Investment Corporation (BCIC).
• Two stockholder demand letters alleged that the registration statement for the merger contained misleading and incomplete information.
• While BCIC believes the claims are without merit, they have decided to supplement the Joint Proxy Statement to reduce potential litigation costs and uncertainties.
• The supplemental disclosures do not change the merger consideration for TCPC stockholders or the timing of the special meeting on March 7, 2024.
• The BCIC Special Committee was formed to consider strategic alternatives, including the merger, and will remain in place through the closing.
• BCIA provided financial forecasts to the BCIC Special Committee, the BCIC Board, and KBW, including estimated future quarterly dividends of $0.34 per share for TCPC and $0.10 per share for BCIC through December 31, 2026.
• The estimated NAV per share as of December 31, 2026, is $13.60 for TCPC and $4.54 for BCIC.
• The selected transactions used for comparison excluded certain transactions with negative or greater than 40x price-to-LTM NII per share multiples.
• Discount rates used in the dividend discount analysis ranged from 10.6% to 12.6% for BCIC and 9.6% to 11.6% for TCPC, based on a capital asset pricing model.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While there are concerns raised by stockholders, the company is addressing them, and the merger is still recommended by the board. The supplemental disclosures are a positive step, but the underlying issues create some uncertainty.

Positives

• The company is proactively addressing stockholder concerns by providing supplemental disclosures.
• The merger is still recommended by the TCPC board, indicating confidence in the deal.
• The supplemental disclosures do not affect the merger consideration or the timing of the special meeting, providing certainty to stockholders.

Negatives

• Stockholder demand letters indicate concerns about the accuracy and completeness of the merger disclosures.
• The need for supplemental disclosures suggests potential issues with the initial filings.
• The company is incurring costs and risks associated with potential litigation.

Risks

• There is a risk of potential litigation related to the merger disclosures.
• The merger may not close if conditions are not met or if stockholders do not approve the proposals.
• There are risks associated with the integration of the two companies after the merger.
• The company faces risks related to changes in the economy, financial markets, and political environment.
• There are risks associated with possible disruption in the operations of BCIC and TCPC or the economy generally due to terrorism, war or other geopolitical conflict, natural disasters or public health crises and epidemics.

Future Outlook

The document includes forward-looking statements regarding the future performance of TCPC, BCIC, and the combined company after the merger, but these are subject to various risks and uncertainties. The company does not commit to updating these statements.

Management Comments

• BCIC believes the stockholder claims are without merit but is supplementing the proxy statement to reduce potential litigation costs.
• The TCPC Board, on the recommendation of the Special Committee, continues to unanimously recommend that TCPC stockholders vote for the merger proposal.

Industry Context

This announcement is related to the ongoing trend of mergers and acquisitions within the business development company (BDC) sector, where companies seek to achieve scale and synergies. The merger is an attempt to consolidate two similar investment vehicles.

Comparison to Industry Standards

• The document references selected transactions for comparison, but excludes some due to negative or very high price-to-LTM NII multiples, indicating a focus on relevant and meaningful comparisons.
• The discount rates used in the dividend discount analysis (10.6% to 12.6% for BCIC and 9.6% to 11.6% for TCPC) are based on a capital asset pricing model, which is a standard approach for valuing financial assets.
• The estimated future dividends and NAV per share are specific to these two companies and their current practices, making direct comparisons to other BDCs difficult without further analysis.

Corporate Governance

Legal Proceedings

• Two stockholder demand letters have been sent to BCIC and the BCIC Board alleging that the registration statement contains materially misleading and incomplete statements.

Stakeholder Impact

• Shareholders of TCPC and BCIC are impacted by the merger and the supplemental disclosures.
• The merger could impact the future performance and dividends of the combined company.
• The potential litigation could impact the company's financial resources and reputation.

Next Steps

• TCPC stockholders are urged to read the supplemental disclosures and the Joint Proxy Statement carefully.
• TCPC stockholders will vote on the merger proposal at the special meeting on March 7, 2024.

Key Dates

Keywords

Merger, BlackRock TCP Capital Corp, BlackRock Capital Investment Corporation, Stockholder Litigation, Proxy Statement, Dividend Discount Analysis, NAV, Special Meeting, Financial Forecasts, Strategic Alternatives