Item 8.01. Other Events.
On June 11, 2020, Goldman Sachs BDC, Inc., a Delaware corporation ("GSBD"),
entered into an Amended and Restated Agreement and Plan of Merger (as amended,
the "Merger Agreement") with Goldman Sachs Middle Market Lending Corp. ("MMLC"),
Evergreen Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of
GSBD ("Merger Sub"), and Goldman Sachs Asset Management, L.P., a Delaware
limited partnership and investment adviser to each of GSBD and MMLC ("GSAM").
The Merger Agreement provides that, subject to the conditions set forth in the
Merger Agreement, Merger Sub will merge with and into MMLC, with MMLC continuing
as the surviving company and as a wholly-owned subsidiary of GSBD, and,
immediately thereafter, MMLC will merge with and into GSBD, with GSBD continuing
as the surviving company (the "Merger").
On August 17, 2020, a purported stockholder class action complaint was filed in
the Superior Court of the State of New Jersey, Hudson County, against GSBD, the
members of the Board of Directors of GSBD (the "GSBD Board"), as well as against
GSAM, entitled Laidlaw v. Ardila, et al., Docket No. EF-169565 (the "Merger
Litigation"). The complaint alleges that the members of the GSBD Board breached
their fiduciary duties of good faith, loyalty, fair dealing and due care in
connection with GSBD's entry into the Merger Agreement. The complaint further
alleges that GSBD and the members of the GSBD Board breached their fiduciary
duties through making materially inadequate disclosures and material omissions
in GSBD's definitive proxy statement filed with the Securities and Exchange
Commission (the "SEC") pursuant to Rule 497 of the Securities Act of 1933, as
amended (the "Securities Act"), on August 4, 2020 and mailed to stockholders of
GSBD on or about August 11, 2020 (the "Proxy Statement"). Finally, the complaint
alleges that GSAM aided and abetted GSBD and the members of the GSBD Board in
breaching their fiduciary duties to plaintiff and GSBD's other shareholders. The
complaint seeks to enjoin the closing of the Merger until trial or until GSBD
makes corrective and complete disclosures as well as certain other equitable
relief, including compensatory and/or rescissory damages and attorneys' fees and
costs.
The defendants believe that GSBD has previously disclosed all information
required to be disclosed to ensure that its stockholders can make an informed
vote at the Special Meeting (as defined below) and that the additional
disclosures requested by the plaintiff are immaterial. Accordingly, defendants
believe these claims are without merit. However, in order to reduce the costs,
risks and uncertainties inherent in litigation, GSBD has determined to
voluntarily supplement the Proxy Statement as described in this Current Report
on Form 8-K (the "Report"). Nothing in this Report shall be deemed an admission
of the legal necessity or materiality under applicable laws of any of the
disclosures set forth herein. To the contrary, GSBD and the GSBD Board
specifically deny all allegations in the Merger Litigation that any additional
disclosure was or is required.
The GSBD Board, including all of the independent directors, continues to
unanimously recommend that GSBD stockholders entitled to vote at the Special
Meeting vote "FOR" each of the GSBD Merger Proposal, the GSBD Charter Amendment
Proposal and the Merger Stock Issuance Proposal (each, as defined in the Proxy
Statement).
These supplemental disclosures will not affect the merger consideration to be
paid by GSBD in connection with the Merger or the timing of GSBD's Special
Meeting of Stockholders scheduled for Friday, October 2, 2020 at 10:00 a.m.
Eastern Time, which will be held in virtual-only format, solely by means of
remote communication (the "Special Meeting").
If you are a GSBD stockholder, you can contact Goldman Sachs Shareholder
Services at the below contact information with any questions regarding the
Special Meeting:
Goldman Sachs Shareholder Services
71 S Wacker Drive, Suite 500
Chicago, Illinois 60606
(312) 655-4702
Attention: AI Shareholder Services
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Supplemental Disclosures.
The following disclosures supplement the disclosures contained in the Proxy
Statement and should be read in conjunction with the disclosures contained in
the Proxy Statement, which should be read in its entirety. To the extent that
the information set forth herein differs from or updates information contained
in the Proxy Statement, the information set forth herein shall supersede or
supplement the information in the Proxy Statement. All page references are to
pages in the Proxy Statement, and terms used below, unless otherwise defined,
have the meanings set forth in the Proxy Statement. For clarity, new text within
restated disclosure from the Proxy Statement is presented in bold text.
The fourth and fifth sentences of the third paragraph on page 152 of the Proxy
Statement are supplemented as follows:
The GSBD Board also met with representatives of various financial institutions,
including BofA Securities (with MMLC's consent), to discuss a potential
engagement as a financial advisor to advise on potential strategic alternatives,
including (i) a merger with or acquisition of a BDC in the Goldman Sachs Fund
Complex, (ii) a merger with or acquisition of an unaffiliated BDC, (iii) an
asset sale, (iv) an equity or rights offering, or (v) a restructuring of GSBD's
capital stock. The purpose of such discussions was to gain a better
understanding of the capabilities of such financial institutions, including
their overall expertise, fee structure, familiarity with advising BDCs and
preliminary views regarding the potential strategic alternatives involving GSBD
mentioned above.
The eighth full paragraph on page 153 of the Proxy Statement is supplemented as
follows:
Beginning on September 13, 2019, the GSBD Special Committee and representatives
of BofA Securities and Dechert conducted regular weekly telephonic meetings to
discuss various aspects of potential strategic alternatives involving GSBD,
including (i) a merger with or acquisition of a BDC in the Goldman Sachs Fund
Complex, (ii) a merger with or acquisition of an unaffiliated BDC, (iii) an
asset sale, (iv) an equity or rights offering, or (v) a restructuring of GSBD's
capital stock.
The first paragraph on page 157 of the Proxy Statement is supplemented as
follows:
On November 19, 2019, representatives of GSAM on behalf of GSBD met with
representatives of Morgan Stanley to review historical and prospective business
and financial information relating to GSBD, including GSBD's 10-day
value-weighted average price, along with the implied price per MMLC share that
GSBD would pay as merger consideration under a range of potential exchange
ratios and a range of potential GSBD trailing 10-day value-weighted average
prices.
The second paragraph on page 162 of the Proxy Statement is supplemented as
follows:
On May 21, 2020, the GSBD Special Committee held a meeting at which
representatives from Dechert and BofA Securities were present. At such meeting,
BofA Securities reviewed with the GSBD Special Committee updated financial
information for GSBD and the BDC sector and a detailed analysis of various
alternatives, including potential revisions to the Initial Merger Agreement, or
selling assets or raising equity to reduce GSBD's debt. More specifically, BofA
provided detailed analyses highlighting the advantages and disadvantages of
several strategic alternatives, including (i) a $100 million asset sale, (ii) a
$150 million asset sale, (iii) a rights offering with a backstop by GSAM or a
third party, (iv) a rights offering without a backstop and (v) a regular way
common equity offering. After discussion, the GSBD Special Committee determined
to further consider and discuss with the other parties a change from the Initial
Exchange Ratio to the NAV-for-NAV exchange ratio and directed representatives
from Dechert to prepare a draft amendment to the Initial Merger Agreement
reflecting such change and circulate the draft among the parties for review and
consideration. The GSBD Special Committee also determined to request from GSAM
an extension of the incentive fee waiver through the end of 2021 and
reimbursement of each of GSBD's and MMLC's transaction fees.
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The second paragraph on page 178 of the Proxy Statement is supplemented as
follows:
BofA Securities reviewed, among other things, per share stock prices, based on
closing stock prices on June 9, 2020, of the selected publicly traded companies
as a multiple of per share NAV, commonly referred to as NAV, calculated as the
difference between the total assets and total liabilities, divided by the total
number of shares outstanding. The selected publicly traded companies and their
respective per share stock price, based on closing stock prices on June 9, 2020,
of each of the selected publicly traded companies as a multiple of per share NAV
are as follows:
NAV
Selected Externally Managed BDCs Multiple
Ares Capital 1.02 x
Owl Rock Capital 0.92
FS KKR Capital Corp 0.72
Prospect Capital Corporation 0.71
Golub Capital 0.86
TPG Specialty Lending 1.25
New Mountain Finance Group 0.93
Apollo Investment 0.64
Solar Capital 1.13
Goldman Sachs BDC 1.21
Bain Capital Specialty Finance, Inc. 0.75
Oaktree Specialty Lending Corp. 0.89
TCP Capital 0.90
TCG BDC, Inc. 0.69
Barings BDC 0.88
Gladstone Investment Corp. 1.01
The overall low to high price to NAV multiples observed for the selected
publicly traded companies were 0.64x to 1.25x (with a mean of 0.91x and a median
of 0.90x). After reviewing the selected publicly traded companies, BofA
Securities observed that GSBD consistently traded at multiples representing a
premium to those for the other companies and thus concluded that GSBD's closing
stock price as of June 9, 2020, with a 15% discount and 15% premium applied,
would serve as the best benchmark for this analysis, with respect to GSBD both
on a standalone basis and on a pro forma basis giving effect to the Merger.
The third paragraph on page 178 of the Proxy Statement is supplemented as
follows:
BofA Securities also reviewed the dividend yield, based on closing stock prices
on June 9, 2020, of the selected publicly traded companies, calculated as the
quotient obtained by dividing the annualized dividend paid per share in the last
quarter for which such information is available by the per share stock price.
The selected publicly traded companies and their respective dividend yields are
as follows:
Dividend
Selected Externally Managed BDCs Yield
Ares Capital 10.1 %
Owl Rock Capital 9.6
FS KKR Capital Corp 17.2
Prospect Capital Corporation 12.7
Golub Capital 10.6
TPG Specialty Lending 8.4
New Mountain Finance Group 13.1
Apollo Investment 15.4
Solar Capital 9.2
Goldman Sachs BDC 10.1
Bain Capital Specialty Finance, Inc. 12.6
Oaktree Specialty Lending Corp. 8.0
TCP Capital 13.5
TCG BDC, Inc. 15.2
Barings BDC 7.9
Gladstone Investment Corp. 7.4
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The overall low to high dividend yields observed for selected publicly traded
companies were 7.4% to 17.2% (with a mean of 11.3% and a median of 10.3%). BofA
Securities also reviewed per share stock prices, based on closing stock prices
on June 9, 2020, of the selected publicly traded companies as a multiple of
calendar year 2020 and calendar year 2021 estimated net interest income ("NII")
per share. The overall low to high price to NII multiples observed for the
selected publicly traded companies were 5.8x to 13.2x (with an mean of 9.5x and
a median of 9.4x) for calendar year 2020 and 6.6x to 15.5x (with an mean of 9.7x
and a median of 9.7x) for calendar year 2021.
FORWARD-LOOKING STATEMENTS
This Report may contain "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Statements other than
statements of historical facts included in this Report may constitute
forward-looking statements and are not guarantees of future performance or
results of GSBD, MMLC, or, following the Merger, the combined company and
involve a number of risks and uncertainties. Such forward-looking statements may
include statements preceded by, followed by or that otherwise include the words
"may," "might," "will," "intend," "should," "could," "can," "would," "expect,"
"believe," "estimate," "anticipate," "predict," "potential," "plan" or similar
words. Actual results may differ materially from those in the forward-looking
statements as a result of a number of factors, including those described from
time to time in filings made by GSBD and MMLC with the SEC, including those
contained in the Proxy Statement. Certain factors could cause actual results to
differ materially from those projected in these forward-looking statements.
Factors that could cause actual results to differ materially include: the
ability of the parties to consummate the Merger on the expected timeline, or at
all, failure of GSBD or MMLC to obtain the requisite stockholder approval for
the Proposals (as defined below) as set forth in the Proxy Statement, the
ability to realize the anticipated benefits of the Merger, effects of disruption
on the business of GSBD and MMLC from the proposed Merger, the effect that the
announcement or consummation of the Merger may have on the trading price of
GSBD's common stock on the New York Stock Exchange; the combined company's
plans, expectations, objectives and intentions as a result of the Merger, any
decision by MMLC to pursue continued operations, any termination of the Merger
Agreement, future operating results of GSBD or MMLC, the business prospects of
GSBD and MMLC and the prospects of their portfolio companies, actual and
potential conflicts of interests with GSAM and other affiliates of Goldman
Sachs, general economic and political trends and other factors, the dependence
of GSBD's and MMLC's future success on the general economy and its effect on the
industries in which they invest; and future changes in laws or regulations and
interpretations thereof. Neither GSBD nor MMLC undertakes any duty to update any
forward-looking statement made herein. All forward-looking statements speak only
as of the date of this Report.
Additional Information and Where to Find It
This Report relates to a proposed business combination involving GSBD and MMLC,
along with related proposals for which stockholder approval will be sought
(collectively, the "Proposals"). In connection with the Proposals, each of GSBD
and MMLC has filed relevant materials with the SEC, including the Proxy
Statement. The Proxy Statement was mailed to stockholders of GSBD and MMLC on or
about August 11, 2020. This Report does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of any vote or
approval. No offer of securities shall be made except by means of a prospectus
meeting the requirements of Section 10 of the Securities Act. STOCKHOLDERS OF
EACH OF GSBD AND MMLC ARE URGED TO READ CAREFULLY AND IN THEIR ENTIRETY ALL
RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE PROXY STATEMENT, AS WELL AS
ANY AMENDMENTS OR SUPPLEMENTS THERETO, BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT GSBD, MMLC, THE MERGER AND THE PROPOSALS. Investors and
security holders will be able to obtain the documents filed with the SEC free of
charge at the SEC's web site, http://www.sec.gov or, for documents filed by
GSBD, from GSBD's website at http://www.goldmansachsbdc.com.
Participants in the Solicitation
GSBD and MMLC and their respective directors, executive officers and certain
other members of management and employees of GSAM and its affiliates, may be
deemed to be participants in the solicitation of proxies from the stockholders
of GSBD and MMLC in connection with the Proposals. Information about the
directors and executive officers of GSBD and MMLC is set forth in the Proxy
Statement. Information regarding the persons who may, under the rules of the
SEC, be considered participants in the solicitation of the GSBD and MMLC
stockholders in connection with the Proposals are contained in the Proxy
Statement and other relevant materials filed with the SEC. This document may be
obtained free of charge from the sources indicated above.
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