BOSTON, August 9 - Ortelius Advisors, one of the largest investors in Capital Senior Living Corp, intends to block the company's plan to raise cash, arguing the deal would hurt existing shareholders.
Ortelius' founder Peter DeSorcy informed the company board on Monday that his firm dislikes how the Dallas-headquartered operator of assisted living and related facilities wants to raise $152.5 million and signalled a willingness to offer a near-term infusion of cash himself.
Two weeks ago Capital Senior Living said it would raise capital through a private placement of incremental preferred shares to affiliates of Conversant Capital and that Conversant agreed to backstop a rights offering and provide an incremental $25 million for future investment.
Ortelius unequivocally opposes the Transactions and intends to vote its shares against their approval, DeSorcy, whose firm owns 9% of CSU, wrote a letter seen by Reuters in a letter read by Reuters. He thinks other investors will vote against it at the special meeting.
A CSU representative did not respond to a request for comment immediately.
Capital Senior Living's stock price has tumbled roughly 40% since the transaction was announced on 22 July to close at $25.50 on Friday, signalling shareholders' disapproval of the transaction.
DeSorcy wrote that the company favoring one shareholder over all others by effectively handing control of CSU to Conversant while punitively diluting existing stockholders and hindering the business with excessive costs. He wrote that the board had breached its fiduciary duties.
The company did not need to raise cash immediately, DeSorcy wrote, adding that the board had other options to raise capital and could have even considered strategic alternatives such as a purchase at a premium of CSU's one-year high stock price of $59.
The senior living industry was hard hit by the pandemic in both because many nursing homes suffered COVID - 19 outbreaks and because occupancy rates declined last year.