The small-cap activist Raging Capital [detailed profile here] is now pushing TICC Capital (NASDAQ: TICC) for a buyout. It wants the Special Meeting to be held on October 27, 2015 to be postponed and the company to hire an investment bank to run a full, fair and complete strategic review process.
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Here’s the full Raging Capital-TICC letter.
Dear Mr. Royce,
Raging Capital Management, LLC (“Raging Capital”) is one of the largest stockholders of TICC Capital Corp. (“TICC” or the “Company”). In light of recent developments at TICC, we are calling upon the TICC board of directors (the “Board”) to immediately postpone the upcoming Special Meeting of Stockholders scheduled to be held on October 27, 2015 and engage a recognized investment bank in order to run a full, fair and complete strategic review process to maximize value for all TICC stockholders.
This strategic review should include exploring: 1) a sale of the Company to a suitable acquiror that could improve shareholder returns via scale efficiencies, lower management fees, improved portfolio management, and better deal sourcing; 2) entering into a fresh management agreement with a firm that can offer permanently lower management fees, superior deal sourcing and portfolio management skills, and who is committed to buying back material amounts of stock if TICC shares trade meaningfully below Net Asset Value, and 3) an outright liquidation and complete return of capital to stockholders.
As you know, Raging Capital has been a stockholder of TICC at various times during the past several years and is very familiar with the Company. In fact, in 2009 we publicly called upon the Company to aggressively buy back shares when they were trading at approximately 60% of mark-to-market value. We also at that time submitted a stockholder proposal to terminate the Investment Advisory Agreement between TICC and its management company.
As Yogi Berra said, it’s “Déjà vu All Over Again.” Prior to TPG Specialty Lending’s offer to acquire TICC for $7.50 per share, the Company’s shares traded at just 73% of last reported book value per share of $8.60. Worse, excluding 45 cents per share of unrealized mark-to-market losses in TICC’s CLO equity investments, TICC shares were trading at less than 70% of its $9.05 in book value per share. As in 2009, when TICC initiated a buyback plan but did not utilize any of it, the Company’s latest buyback plan announced in December 2014 was in our view more for window dressing than actual use: TICC bought back less than 1% of its outstanding shares in late 2014 and early 2015. Subsequently, TICC appears to have suspended its buyback altogether while management collected its fees and focused on the sale ofits management company.
Now, we want to ensure that the TICC Board is acting in accordance with its fiduciary obligations and in the best interests of all TICC stockholders and is not simply “rubber stamping” a change in the management company in order to enrich the “sellers”, TICC CEO Jonathan Cohen and his associates. For example, the fact that Benefit Street Partners was so quick to lower its management fee proposal in response to NexPoint’s initial counter-offer is cause for serious concern that the Board may not have run a full and comprehensive process to begin with.
We find ourselves at a critical juncture in TICC’s history where the Board’s decisions and actions over the next few weeks will have significant ramifications to stockholders. It is therefore incumbent upon the Board to immediately postpone the Special Meeting, take a step back and acknowledge serious stockholder concerns such as high management fees, a chronic discount to book value and lack of notable stock buybacks when the stock has traded materially below Net Asset Value. The Board should then hire an investment banking firm to assist it with evaluating the current proposals on the table as well as all other strategic alternatives to maximize stockholder value. A “Meet the New Boss, Same as the Old Boss” approach is not satisfactory.
Sincerely,
/s/ William C. Martin
