Great Elm Capital Group Inc (GECC)

[Enterprising Investor]

Full Circle Capital Corporation to Merge (6/24/16)

- Transaction More Than Doubles Assets Under Management -

- Combined Company to be Named Great Elm Capital Corp. -

- New Investment Management Agreement with Great Elm Capital Management -

GREENWICH, Conn., June 24, 2016 (GLOBE NEWSWIRE) -- Full Circle Capital Corporation (“Full Circle”) (NASDAQ:FULL) today announced that it has entered into a merger agreement with Great Elm Capital Corp., a company formed by Great Elm Capital Group, Inc. (“GEC”, formerly Unwired Planet, Inc.) (NASDAQ:GEC) and funds managed by MAST Capital Management, LLC (“MAST Capital”). The transaction is the result of the previously announced review of strategic alternatives led by a special committee of Full Circle’s board of directors and has been unanimously approved by Full Circle’s board of directors.

The combined company, to be named Great Elm Capital Corp., will apply for listing on NASDAQ under the symbol “GECC”. Great Elm Capital Corp. will elect to be regulated as a business development company (BDC) under the Investment Company Act of 1940 and expects to be treated as a “regulated investment company” for federal income tax purposes. Full Circle stockholders are expected to own approximately 38% of the combined Great Elm Capital Corp., based on a pro-forma net asset value in excess of $190 million as of March 31, 2016.

Full Circle will:

•Be valued for purposes of the merger at 100% of its net asset value of approximately $81 million as of March 31, 2016, prior to taking into account transaction costs and the special cash distribution described below;

•Immediately prior to the completion of the merger, declare a special cash distribution to Full Circle stockholders of approximately $0.22 per share, aggregating to $5 million, or 6% of Full Circle’s March 31, 2016 net asset value.

Upon completion of the merger, highlights of the combined company will include:

•Over $55 million of investable cash (net of transaction costs) and over $165 million of debt instruments in its portfolio, after the contribution of $30 million in cash by Great Elm Capital Group, Inc., and the contribution of an approximate $90 million portfolio (market value as of May 31, 2016) of debt instruments from funds managed by MAST Capital;

•An expected initial annualized base distribution rate of approximately 9% of its net asset value, subject to approval by Great Elm Capital Corp.’s Board of Directors;

•The initiation of a $15 million stock repurchase program, subject to liquidity, credit facility and other considerations, triggered if shares trade below 90% of net asset value;

•A new investment management agreement with Great Elm Capital Management, Inc. with a management fee of 1.50%, reduced from the 1.75% management fee currently paid by Full Circle, and 20% incentive fee above a 7% annualized hurdle rate, subject to a deferral mechanism if the total return on beginning net assets on a rolling three-year basis does not exceed the hurdle rate;

•The parent of Great Elm Capital Management, Inc. will own approximately 15% of the outstanding shares, on a pro-forma basis;

•Full Circle’s outstanding senior notes will be assumed by Great Elm Capital Corp.

“Great Elm Capital Corp. will be a differentiated BDC that seeks to generate attractive risk-adjusted returns through our team’s knowledge and experience in deep value credit investing and focus on the preservation of capital,” said Peter A. Reed, a partner at MAST Capital who will become Chief Executive Officer of the combined company. “In MAST Capital’s 14-year history, we have used this highly rigorous approach to identify attractive, risk-adjusted opportunities with identifiable catalysts for capital appreciation. We believe this is a particularly opportune time to identify value investments in the credit markets and are excited to have the opportunity to employ our strategy for Great Elm Capital Corp.’s stockholders.”

The combined company will concentrate its portfolio in fixed income instruments of middle market companies by focusing on the high yield market to take advantage of market dislocation, special situations and event-driven opportunities. Great Elm Capital Corp. will be externally managed by Great Elm Capital Management, Inc., a joint venture led by MAST Capital’s experienced investment team. The joint venture is expected to continue MAST Capital’s research-driven approach to investing across the capital structures of middle market companies to generate sustainable recurring net investment income for distribution and capital appreciation.

The exact exchange ratio in the merger will be determined by the net asset value of the parties at the end of the month prior to the distribution of the proxy statement to Full Circle’s stockholders to vote on the merger. In addition to approval by Full Circle’s stockholders and payment of the special distribution, the closing of the merger is subject to customary conditions. The parties currently expect the transaction to be completed in the second half of calendar 2016.

“After a comprehensive review process, we and our Board are fully supportive of this proposed merger,” said Gregg J. Felton, Chief Executive Officer of Full Circle. “This transformational transaction enhances Full Circle significantly, as it more than doubles our current asset base, provides economies of scale, grows our net investment income stream and places our assets under the management of experienced middle-market credit investors. The combined company’s strategy has been deployed for many years in MAST Capital’s private funds, and the merger will allow our investors to realize identifiable value, while once again receiving distributions with the opportunity to realize additional growth over the long-term.”

Investor Presentation

Full Circle will host a conference call and webcast this morning beginning at 8:00 a.m. Eastern Time related to the contents of this release. Full Circle and Great Elm Capital Corp. have prepared a presentation regarding the transaction that may be downloaded at ir.fccapital.com.

Those participating via telephone should dial 888-364-3104 no later than 10 minutes prior to the call. A replay of the call will be available at ir.fccapital.com as soon as practicable after the completion of the call through the end of business on July 1, 2016. An audio replay will also be available until July 1, 2016, by dialing 1-877-870-5176 (toll-free) or 1-858-384-5517 (international), PIN: 3748980.

Transaction Advisors

Houlihan Lokey served as exclusive financial advisor to the special committee of Full Circle’s board of directors. Clifford Chance US LLP advised the special committee, and Sutherland Asbill & Brennan LLP is counsel to Full Circle.

Skadden, Arps, Slate, Meagher & Flom LLP, Schulte Roth & Zabel LLP and Akin Gump Strauss Hauer & Feld LLP are legal advisors for the acquisition group.

About Full Circle Capital Corporation

Full Circle Capital Corporation (www.fccapital.com) is a closed-end investment company that has elected to be regulated as a business development company under the Investment Company Act of 1940. Full Circle lends to and invests in senior secured loans and, to a lesser extent, mezzanine loans and equity securities issued by lower middle-market companies that operate in a diverse range of industries. Full Circle’s investment objective is to generate both current income and capital appreciation through debt and equity investments. For additional information visit Full Circle’s website www.fccapital.com.

About MAST Capital Management

Founded in 2002, MAST Capital Management, LLC is an SEC-registered investment adviser that specializes in event-driven and credit investments, focusing predominantly on middle market opportunities. Currently, MAST manages and sub-advises approximately $1.0 billion for sophisticated institutional and family office investors globally. The Boston-based firm is employee-owned with a minority stake held by Dyal Capital Partners, a subsidiary of Neuberger Berman.

About Great Elm Capital Group, Inc.

Great Elm Capital Group, Inc. (formerly known as Unwired Planet, Inc.) is building a middle-market focused alternative asset management platform. GEC entered into an agreement to divest its legacy patent business that is currently expected to close before the transaction.

https://globenewswire.com/news-release/2016/06/24/851120/0/en/Full-Circle-Capital-Corporation-to-Merge.html