Sunset Believes Flawed ISS Analysis Reached the Wrong Conclusion
27 Settembre 2006 - 1:02AM
PR Newswire (US)
Sunset Urges Stockholders to Vote FOR Alesco Merger JACKSONVILLE,
Fla., Sept. 26 /PRNewswire-FirstCall/ -- Sunset Financial
Resources, Inc. (NYSE:SFO) today announced that it believes
Institutional Shareholder Services has produced a deeply flawed and
factually incorrect analysis which reached the wrong conclusion
regarding Sunset's proposed merger with Alesco Financial Trust.
Stockholders should focus on these significant issues:
Comprehensive Process Led by a Special Committee. * Sunset ran a
very thorough process to explore all strategic alternatives. It
formed a Special Committee of independent directors to run the
process, hired Banc of America Securities LLC and issued a press
release announcing it was exploring all strategic alternatives. *
Banc of America Securities contacted 70 parties, including 22 asset
managers, as part of the strategic alternatives review process.
Twenty one parties signed confidentiality agreements and reviewed
detailed company data. At the end of a comprehensive and inclusive
process, only two parties submitted proposals. No asset manager
other than Cohen Brothers submitted a proposal. The Alesco proposal
was the best offer to maximize stockholder value. Strategic
Rationale Supports the Proposed Merger. * Sunset lacks scale as a
separate company and would require significant additional capital
to pursue a viable standalone strategy. * Sunset believes the
Alesco merger creates the scale necessary for continued access to
the capital markets. Sunset does not believe it can pursue its
strategy effectively without the capital and scale that will result
from the merger. * Sunset's annual G&A burden will be cut from
7% to 1.5% of equity. * Pro forma combined assets following the
Alesco merger are expected to be nearly $4 billion. * Sunset
believes that partnering with Cohen Brothers, a leader in the
industry and trust preferred securities, will best accomplish its
strategy to diversify into higher yielding assets. Valuation is
Fair and Represents the Best Alternative for Stockholders. * The
valuation reflects a comprehensive process where Sunset's financial
data and prospects were evaluated by the twenty one parties signing
confidentiality agreements and is supported by a Banc of America
Securities fairness opinion. * The valuation represents a premium
of 7% to the $7.95 unaffected closing price on Oct 27, 2006, the
day before the announcement that Sunset had hired Banc of America
Securities to explore all strategic alternatives. * ISS
inaccurately reports that Sunset lost $22 million selling assets.
The actual loss after taking into account related hedge gains is $3
million. * ISS inaccurately reports merger expenses of $10 million.
The actual out-of-pocket cost will be $7 million, most of which
would be incurred under any strategic alternative Sunset pursues. *
ISS inaccurately reports that Cohen Brothers will be paid a large
break- up fee if the merger is not approved. Cohen Brothers is not
due any fee if the merger is not approved. * ISS notes that
Sunset's stock dropped a few percent following the announcement of
the merger. The pre-announcement price was not an unaffected market
price, given Sunset's earlier announcement that it was exploring
alternatives. In addition, Sunset has since increased the price to
its stockholders by negotiating a $0.50 per share dividend.
Super-majority Independent Board Post-Merger. * Following the
merger, seven of nine directors will be independent directors. *
Independent directors evaluate all transactions with potentials for
conflict. This is becoming the standard practice at all externally
managed REITs. * Sunset will hold its annual meeting to elect
directors by December 31, 2006. All stockholders will have the
opportunity to vote for all board members at that meeting.
Conclusion - the Proposed Merger Should be Supported. * ISS
acknowledges that an external manager is a preferable approach for
a small cap REIT such as Sunset. Sunset has already adopted this
approach. * Western Investments offers no meaningful alternative.
It has not disclosed any strategy beyond seeking another outside
advisor and, if that fails, working with existing management. * The
merger offers stockholders an opportunity to realize upside
potential and own a more liquid security. Sunset's Board of
Directors believes that Sunset's ability to grow and access higher
yielding investment opportunities depends directly on the
consummation of the proposed merger. The Board of Directors has
carefully considered the merger and believes it is the best
available alternative for Sunset stockholders. We intend to vote
FOR the merger and encourage all stockholders to do the same. After
completion of the merger, Sunset intends to continue to qualify as
a real estate investment trust for federal income tax purposes and
will continue to have its shares listed on the New York Stock
Exchange. WE URGE SUNSET STOCKHOLDERS TO VOTE FOR THE PROPOSED
MERGER ON THE WHITE PROXY CARD Please promptly return the WHITE
proxy card to vote for the merger and the plan. Be sure to vote
only on the WHITE proxy card. Even if you have already returned
another proxy card, you have every right to change your vote by
signing, dating and returning the WHITE proxy card. If you have any
questions or need assistance, please call MacKenzie Partners at
(800) 322-2885 or collect at (212) 929-5500. About Sunset Financial
Resources Sunset Financial Resources, Inc. is a specialty finance
REIT headquartered in Jacksonville, Florida and trades on the New
York Stock Exchange under the symbol "SFO." Additional Information
about the Merger Sunset stockholders are urged to read the proxy
statement for the merger and the tender offer statement, letter of
transmittal and other materials relating to the tender offer, as
they contain important information regarding the merger and the
offer. Stockholders can obtain a copy of the proxy statement,
tender offer statement, letter of transmittal and other related
materials free of charge from the SEC's web site,
http://www.sec.gov/, from the information agent for the merger and
the tender offer, MacKenzie Partners, Inc., by calling (800)
322-2885 (call toll-free), or by directing a request to . We urge
Sunset stockholders to carefully read those materials prior to
making any decision with respect to the merger and the tender
offer. Forward-Looking Statements Information set forth in this
release contains forward-looking statements, which involve a number
of risks and uncertainties. Sunset cautions readers that any
forward-looking information is not a guarantee of future
performance and that actual results could differ materially from
those contained or implied in the forward-looking information. Such
forward-looking statements include, but are not limited to,
statements about the benefits of the business combination
transaction involving Sunset and Alesco, including future financial
and operating results, the new company's plans, objectives,
expectations and intentions and other statements that are not
historical facts. The following factors, among others, could cause
actual results to differ from those set forth in the
forward-looking statements: factors that affect the timing or
ability to complete the transactions contemplated herein; the risk
that the business will not be integrated successfully; the risk
that cost savings and any other synergies from the transaction may
not be fully realized or may take longer to realize than expected;
disruption from the transaction making it more difficult to
maintain relationships with lenders, other counterparties, or
employees; competition and its effects on pricing, spending,
third-party relationships and revenues; the failure of the
companies to successfully execute their business plans, gain access
to additional financing, the availability of additional loan
portfolios for future acquisition, continued qualification as a
REIT and the cost of capital. Additional factors that may affect
future results are contained in Sunset's proxy statement relating
to the merger and Sunset's other SEC filings, which are available
at the SEC's web site http://www.sec.gov/. Sunset disclaims any
obligation to update and revise statements contained in these
materials based on new information or otherwise. Company Contact:
Stacy M. Riffe Chief Executive Officer (904) 425-4365 Investors:
KCSA Worldwide Jeffrey Goldberger 212.896.1249 DATASOURCE: Sunset
Financial Resources, Inc. CONTACT: Stacy M. Riffe, Chief Executive
Officer of Sunset Financial Resources, Inc., +1-904-425-4365, ; or
Investors, Jeffrey Goldberger of KCSA Worldwide, +1-212-896-1249,
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