Merger Agreement is a definitive agreement that can be terminated by Ready only upon failure of condition (such as a breach of reps and warranties, withdrawal of recommendation by UDF Board, material adverse change etc) or in exercise of fiduciary duties upon receipt of a superior offer, so the notion that the green board can come in and simply "scuttle" the agreement without cause or without a superior proposal is not factual. Moreover, the Merger Agreement prohibits solicitation of a competing offer and also requires that any ongoing discussions at time of Merger Agreement be shut down. Because of lack of transparency by UDF Board and management over the years, there is not enough public information for someone to intelligently formulate a competing proposal within the time frame that would disrupt this deal. Even if someone did lob in a competing proposal, the Board, in the exercise of its fiduciary duties, would have to allow the offeror access to materials, and the corporate protections of the Board are so strong that I could see them just saying "it's not compelling," determining that the inquiry or offer was not superior and never allowing the competing proposal to see the light of day. According to Ready's announcement day presentation, there is a long history of transactions/cooperation between Ready and UDF IV, so this was always the white knight deal - we shareholders just never knew it because the Board/management hasn't told us anything for years. Another factor to consider here: Ready's financial adviser in the transaction is Piper Sandler, who has placed tens of millions of bonds for UDF IV over the past few years. This seems to be a fairly incestuous gathering, and the likelihood of any competitive offer is almost nil, insofar as Ready has such a massive information and relationship advantage over anyone else. Moreover, there is a $4 million termination (breakup) fee if the Merger Agreement is terminated due to a competing offer - therefore, any competing bidder would have to better the deal by at least $4 million. At the end of the day, there are a bunch of contingencies surrounding this deal, and the Board has the fiduciary obligation to properly navigate the contingencies and seek to maximize value - who do you trust to do that?? Existing management has already for two years overstated the value of the Company by advancing the ~$10.00 per share NAV narrative. The loan book is obviously significantly impaired, given the fact that Ready is only paying about $92 million (plus maybe a little pie in the sky) for a $257 million loan book. The SEC suspected this in 2014, causing Whitley Penn to resign as auditor, and the new auditor, with no exposure to the SEC or lenders, has allowed the overstatement to be perpetuated until someone finally came in and put a market "mark" on the loan book. How can anyone trust the current team. Finally, the existing Board allowed perhaps as much as $125 million (as much as $4.00 per share) to be spent by UDF IV defending the perpetrators of the Ponzi scheme, who were employees of the external adviser, UMTH General Services, and, per contract, not entitled to that defense. By contract, UDF IV had the right to seek indemnification for this from the Adviser yet never pursued that. This deal wipes that slate clean. Clever way to cleanse all past sins. A new board inserted before closing of the Ready Capital deal might have the ability to claw back something.
AI
