Prospect Capital To Buy Nicholas Financial For $16/Shr - Quick Facts

(RTTNews) - Prospect Capital Corp. (PSEC) has agreed to acquire 100% of Nicholas Financial, Inc.'s (NICK) common stock for $16.00 per share. The deal is currently contemplated to close in April 2014, though this timing could be earlier or later depending on the time required to obtain the requisite approvals. Nicholas' board has voted to recommend the transaction to the security holders of Nicholas.

Founded in 1986, Nicholas is a specialty finance company headquartered in Clearwater, Florida. Nicholas is mainly engaged as an indirect lender in the consumer automobile lending business, where Nicholas purchases loans originated by over 1,600 car dealerships. Nicholas currently employs over 320 people and has an aggregate loan portfolio exceeding $290 million.

Prospect Capital for around $199 million in consideration would be buying 100% of the common stock and outstanding options to purchase common stock of Nicholas. Including the $199 million equity valuation for Nicholas and considering its outstanding net debt, which is currently $127 million, the overall value placed on Nicholas in the transaction is nearly $326 million before estimated transaction fees and expenses.

Following the transaction closure, Prospect expects Nicholas to pay out substantially all of its income to Prospect on an ongoing basis. Prospect has structured the post-recapitalization entity in a tax efficient manner expected to result in substantial elimination of corporate taxation going forward. For the trailing year ending September 2013, Nicholas recorded pre-tax income of $31.8 million.

Prospect's post-recapitalization $139 million investment in Nicholas is likely to include $122 million of operating and holding company term loans and $17 million of a holding company equity investment.