Allied Capital Corporation Board Of Directors Under Investigation

If you are currently an investor in shares of Allied Capital Corporation (Public, NYSE:ALD), and purchased the shares before October 26, 2009, and / or have additional information relating to the investigation, you should contact the Shareholders Foundation.

To have your information reviewed for options and to recieve notifications about this investigation, please use this form. You may also send an email to, or call us at (858) 779-1554.
Company Name(s): 
Allied Capital Corporation
Affected Securities: 

An investigation on behalf of current investors Allied Capital Corporation (Public, NYSE:ALD), who purchased the shares before October 26, 2009, over potential breaches of fiduciary duty and other violations of state law in connection with an alleged unfair takeover price were announced.

The investigation by a law firm focus on potential breaches of fiduciary duty and other violations of state law by the Board of Directors of Allied Capital Corp arising out of their attempt to sell Allied Capital Corporation (Public, NYSE:ALD) to Ares Capital. On October 26, 2009 Allied Capital Corporation (NYSE: ALD) and Ares Capital Corporation (NASDAQ: ARCC) announced that they have entered into a definitive agreement under which Ares Capital will acquire Allied Capital in an all stock transaction currently valued at $648 million, or approximately $3.47 per Allied Capital share. The Boards of Directors of both companies have each unanimously approved the transaction. Under the terms of the transaction, Allied Capital stockholders will receive 0.325 Ares Capital shares for each Allied Capital share and this represents a 27.3% premium to Allied Capital’s closing stock price on Friday, October 23, 2009.

But according to an investigation by a law firm “the transaction appears to be unfair” to current investors of Allied Capital Corporation (Public, NYSE:ALD) because the “offer to purchase Allied Capital Corporation (ALD) appears opportunistically timed to take advantage of the current economic downturn”. The investigation “concerns whether the Allied Capital Board of Directors breach their fiduciary duties to Allied Capital Corporation (NYSE:ALD) shareholders by agreeing to sell the ALD an unfair price thereby harming Allied Capital Corporation”, “whether the directors of Allied Capital may have breached their fiduciary duties by not acting in ALD shareholders' best interests”, and “the Company may not have adequately shopped itself around before entering into this transaction and, pursuant to this proposed transaction, Ares Capital Corporation may be underpaying for Allied Capital Corporation, thus unlawfully harming ALD shareholders”. Therefore the investigation “ concerns whether the Allied Capital Board of Directors breached their fiduciary duties to Allied Capital shareholders given that (i) the Company's stock has traded at $4.10 per share as recently as August 3, 2009 and has traded at a 52-week high of $7.87; (ii) the average share price of Ares capital stock for the six-month period prior to the announcement is approximately $8.77 which would imply a share value for Allied Capital of only $2.85 per share; (iii) the Company has a book value of approximately $7.49 a share; and (iv) analysts have set a mean price target for Allied Capital stock at $3.75 per share with at least one analyst setting a $4.50 price target.

Allied Capital Corporation, located in Washington, DC, is a closed-end, non-diversified management investment company that operates as a business development company. The Company’s investment objective is to achieve current income and capital gains. The Company is engaged in private equity business. Allied Capital reported in 2007 Total Revenue of $461.705million with a Net Income of $153.303million and in 2008 Total Revenue of $502.244million. Shares of Allied Capital (ALD) traded after the news at $3.51 per share and at close to $3 per share days before the announcement. Allied Capital Corp. shares ALD were down from its 52weekHigh of $7.87 per share, $14.90 per share in September ’08, $22.96 per share in February ’08, and over $32 per share in 2007.