SpringOwl Asset Management Expresses Concerns Over DFC Global Corp Sale Agreement

Requests More Thorough Disclosure And Scrutiny Of DFC's Sale Process

Apr 02, 2014, 16:03 ET from SpringOwl Associates LLC

NEW YORK, April 2, 2014 /PRNewswire/ -- SpringOwl Asset Management LLC and its affiliate funds ("SpringOwl") own 659,002 shares, representing approximately 1.71%, of the outstanding common stock of DFC Global Corp ("DFC" or the "Company") and we intend to acquire additional shares subject to market prices, having spent considerable time and resources to come to the view that DFC's common stock trades at undervalued levels and offers tremendous potential upside to patient long-term investors.  SpringOwl has reviewed the April 2, 2014 press release issued by DFC, announcing that the Company had entered into a definitive agreement to be acquired by Lone Star Funds at a price of $9.50/share, representing an absurdly low, less-than 5.8% premium to last night's closing price, and a 42.2% discount to DFC's 52-Week High stock price.

SpringOwl believes that DFC is on the verge of moving past its UK regulatory issues, having had multiple conversations with management in which management affirmed that view.  As it appears that the Special Committee did not engage alternative buyers for the Company, and given i) the almost trough levels of the Company's stock and ii) the Board's historic "friendliness" with management (ISS recommended that shareholders vote "AGAINST" the Company's "Say-On-Pay" resolution at its November 2013 Annual Meeting, as a result of CEO equity awards which they believed created a misalignment with shareholders), we cannot help questioning whether the sale process was structured to maximize value to DFC shareholders, or, instead, to favor the Company's management team through a partnership with Lone Star.  SpringOwl's analysis notes that the proposed transaction is all cash, squeezing out public shareholders from all benefits of DFC's future growth and value creation from its vast alternative lending network. Accordingly, SpringOwl requests more thorough disclosure and the application of greater scrutiny of the sales process to ensure that the process was not designed to favor any particular buying group.

We also note that DFC issued a press release this morning which conveniently lowered its 2014 guidance.  Given the discretion involved in such guidance, SpringOwl seeks further explanation of whether this guidance reduction was in any way meant to justify the appallingly low price at which the CEO's hand-picked Board agreed to sell this Company.

Jason Ader, Chief Investment Officer of SpringOwl, stated, "We purchased DFC intending to be long term participants in what we believe will be substantial value realization by the Company.  We have real questions about a process that seems to have been geared to a single buyer in the absence of competition."

Andrew Wallach, Portfolio Manager of SpringOwl added, "We believe that appropriate measures for fair change of control value are determined by assessing net present value of discounted cash flows and/or valuation multiples of prospective cash flows, and we encourage greater disclosure of the Board's methodology in supporting a seemingly lowball offer for our Company."

SpringOwl's policy is to view any so-called "deal protections," which impede higher and better offers providing greater value to DFC shareholders, with great suspicion.  This is especially so when there is legacy management continuation or sizable severance payouts.  Limited windows for superior offers and "break-up" fees are examples of such deal protections that may not serve selling shareholders well and require great scrutiny.

Important Information:
SpringOwl Associates LLC (the "Adviser"), a New York limited liability company, commenced operations in 1970, under the name of Cumberland Associates, and is wholly owned and controlled by SpringOwl Asset Management LLC ("SpringOwl"), a Delaware limited liability company founded in 2013.   The principal owner of the Adviser is SpringOwl.  The principal owners of SpringOwl are Jason N. Ader and Andrew M. Wallach.

SOURCE SpringOwl Associates LLC