Transaction Expected to be Accretive to AFN Shareholders Who are Expected to Benefit from Significant Cost Savings, Diversified Revenue and Fee Income Streams
Combined Company Expected to Gain Greater Access to New Capital and Talent
Combined Company Positioned to Pursue Value Creation Opportunities in Credit Fixed Income Market Dislocation
PHILADELPHIA, Feb. 20 /PRNewswire-FirstCall/ -- Alesco Financial Inc. (NYSE: AFN), a specialty finance real estate investment trust externally managed by Cohen & Company, a privately-held investment firm specializing in credit related fixed income investments, today announced the signing of a definitive merger agreement between the two companies.
AFN's Board of Directors and Cohen & Company's Board of Managers have each unanimously approved the transaction. Cohen & Company will merge with a wholly-owned subsidiary of AFN and will survive the merger as a subsidiary of AFN. In the merger, members of Cohen & Company will have the option to exchange each of their membership units in Cohen & Company for either shares of common stock of AFN, or replacement units of membership interest in Cohen & Company which may be exchanged into shares of AFN in the future. Holders of common stock of AFN will continue to hold their shares of AFN. AFN will continue to be a publicly traded entity and is expected to operate as a C-Corp for tax purposes. Pursuant to the merger agreement, AFN will complete a 1 for 10 reverse split of its common stock. It is currently expected that former shareholders of AFN will own 62.4% of the shares of AFN's common stock immediately after the merger and former unit holders of Cohen & Company will hold the balance; however, the actual percentages will not be known until members of Cohen & Company have made their elections to receive AFN common stock or replacement units of Cohen & Company. If all Cohen & Company membership interests were to be converted into AFN shares, current AFN shareholders would own 38.5%, and former Cohen & Company members would own 61.5%, of the combined company. Cohen & Company will be treated as the acquirer for accounting purposes.
The terms of the merger agreement include a 'Go Shop' provision for AFN to pursue superior merger or other strategic opportunities for a period of 40 days from the date of the execution of the merger agreement. The Special Committee of the Board of Directors of AFN has instructed its investment banker, Stifel, Nicolaus & Company, Incorporated, to assist the Special Committee in evaluating any potentially superior opportunities.
Upon the closing of the transaction, Daniel Cohen, Chairman of Cohen & Company, will retain the role of Chairman and assume the role of Chief Executive Officer of AFN. Christopher Ricciardi, Chief Executive Officer of Cohen & Company, will serve as President of AFN and Chief Executive Officer of the combined company's Capital Markets business. Joseph Pooler, Chief Financial Officer of Cohen & Company, will become the Chief Financial Officer of AFN.
In the near term, the merger of the two companies is expected to provide the combined entity with enhanced financial resilience, synergies and economies of scale to better manage through current market conditions. The transaction is expected to be accretive to AFN shareholders. AFN's business model will shift from a capital investment company to an operating company with various types of revenue streams and positive cash flow from operations.
Over the medium to long term, the combination creates a platform specializing in credit related fixed income trading and management and a combined company with greater capital resources to pursue opportunistic initiatives in a distressed market, which may include potential acquisitions of other asset management and investment firms.
Daniel Cohen, Chairman of AFN and Cohen & Company, said, 'This agreement is a critical milestone towards a transaction that we believe will preserve value for AFN shareholders in the near-term, while providing significant potential value enhancement opportunities over the medium to long term. The fixed income and structured credit markets continue to be faced with significant challenges and dislocation.
