On November 23, 2020, FS KKR Capital Corp. II, a Maryland corporation (“FSKR”), entered into an Agreement and Plan of Merger (the “Merger
Agreement”) with FS KKR Capital Corp., a Maryland corporation (“FSK,” and together with FSKR, the “Funds”), Rocky Merger Sub, Inc., a Maryland corporation and wholly owned subsidiary of FSK (“Merger Sub”), and
FS/KKR Advisor, LLC, a Delaware limited liability company and investment adviser to each of the Funds (the “FS/KKR Advisor”). The Merger Agreement provides that, subject to the conditions set forth in the Merger Agreement, Merger Sub will
merge with and into FSKR, with FSKR continuing as the surviving company and as a wholly-owned subsidiary of FSK (the “First Merger”), and, immediately thereafter, FSKR will merge with and into FSK, with FSK continuing as the surviving
company (together with the First Merger, the “Merger”).
On April 8, 2021, a stockholder complaint was filed in the Supreme Court of the
State of New York, County of New York, against FSKR and the members of the Board of Directors of FSKR (the “FSKR Board”), entitled Solar v. FS KKR Capital Corp. II, et al., Index No. 652317/2021 (the “Merger Filing”).
The complaint alleges, among other things, that the joint definitive proxy statement/prospectus of FSK and FSKR (the “Proxy Statement”) filed with the Securities and Exchange Commission (the “SEC”) on March 1, 2021 contained
materially misleading and incomplete disclosures. The complaint seeks, among other things, supplemental disclosures be made to the Proxy Statement to address the alleged materially misleading and incomplete disclosures and to enjoin the closing of
the Merger. In addition, certain other FSKR stockholders, acting through counsel, have also requested that FSKR and/or FSK provide supplemental disclosures to the Proxy Statement.
FSKR, the individual defendants and FSK believe that FSKR and FSK have previously disclosed all information required to be disclosed to ensure that their
respective stockholders can make an informed vote at the Special Meeting (as defined below) and that the additional disclosures requested by the plaintiff and the requesting stockholders are immaterial. Accordingly, FSKR, the individual defendants
and FSK believe these claims are without merit. However, in order to reduce the costs, risks and uncertainties inherent in litigation, FSKR and FSK have determined to voluntarily supplement the Proxy Statement as described in this Current Report on
Form 8-K (the “Report”). Nothing in this Report shall be deemed an admission of the legal necessity or materiality under applicable laws of any of the disclosures set forth herein. To the contrary,
FSKR, the FSKR Board, FSK and the Board of Directors of FSK specifically deny all allegations in the Merger Filing and the stockholder requests that any additional disclosure was or is required.
The FSKR Board, including all of the independent directors, continues to unanimously recommend that FSKR stockholders entitled to vote at the Special
Meeting vote “FOR” the FSKR Merger Proposal (as defined in the Proxy Statement).
These supplemental disclosures will not affect the merger
consideration to be issued by FSK in connection with the Merger or the timing of FSKR’s Special Meeting of Stockholders scheduled for May 21, 2021 at 2:00 p.m. Eastern Time, which will be held at 201 Rouse Boulevard, Philadelphia, PA 19112
(the “Special Meeting”).
If you are an FSKR stockholder, you can contact Broadridge Financial Solutions, Inc. at the below contact information
with any questions regarding the Special Meeting:
Broadridge Financial Solutions, Inc.
51 Mercedes Way
Edgewood, New York 11717
1-833-868-3374
Supplemental Disclosures.
The following
disclosures supplement the disclosures contained in the Proxy Statement and should be read in conjunction with the disclosures contained in the Proxy Statement, which should be read in its entirety. To the extent
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that the information set forth herein differs from or updates information contained in the Proxy Statement, the information set forth herein shall supersede or supplement the information in the
Proxy Statement. All page references are to pages in the Proxy Statement, and terms used below, unless otherwise defined, have the meanings set forth in the Proxy Statement. For clarity, new text within restated disclosure from the Proxy Statement
is presented in bold text.
The first sentence of the first paragraph on page 43 of the Proxy Statement is supplemented as follows:
On July 23, 2020, the subset of Independent Directors consisting of Messrs. Hagan, Ford, Goldstein and Kropp, along with representatives of
Stradley, met separately with representatives of each of the three remaining investment banks and discussed the presentations in executive sessions after the meetings.
The first sentence of the second paragraph on page 64 of the Proxy Statement is supplemented as follows:
Based on the results of this analysis, the consensus Price/NAV multiple and 2021E dividend yield for FSKR of 0.63x and 14.1%, respectively, as published by
Factset Research Systems, and on other factors J.P. Morgan considered appropriate, J.P. Morgan selected a range of Price/NAV multiples from 0.60x to 1.00x.
The second bullet point in the fifth paragraph on page 64 of the Proxy Statement is supplemented as follows:
a range for cost of equity of 11.0% to 12.0%, which range was chosen by J.P. Morgan taking into account macroeconomic assumptions, estimates of risk and
other appropriate factors based on its professional experience and judgment;
The third paragraph on page 65 of the Proxy Statement is supplemented
as follows:
For reference only and not as a component of its fairness analysis, J.P. Morgan reviewed the six publicly available equity
research analyst price target for FSKR Common Stock and noted that the range of such price targets was $14.25 per share to $19.00 per share, with a consensus median of $17.13 per share, and compared that price target range to (1) the implied
offer price per share of FSKR Common Stock of $16.88 (based on the J.P. Morgan September Exchange Ratio of 1.00802x and the closing price per share of FSK Common Stock of $16.75 on November 18, 2020) and (2) the closing price per share of
FSKR Common Stock of $15.56 on November 18, 2020.
The first sentence of the first paragraph on page 66 of the Proxy Statement is supplemented as
follows:
Based on the results of this analysis, the consensus Price/NAV multiple and 2021E dividend yield for FSK of 0.68x and 14.3%, respectively,
as published by Factset Research Systems, and on other factors J.P. Morgan considered appropriate, J.P. Morgan selected a range of Price/NAV multiples from 0.60x to 1.00x.
The second bullet in the fifth paragraph on page 66 of the Proxy Statement is supplemented as follows:
a range for cost of equity of 11.0% to 12.0%, which range was chosen by J.P. Morgan taking into account macroeconomic assumptions, estimates of risk and
other appropriate factors based on its professional experience and judgment;
The eighth paragraph on page 66 of the Proxy Statement is
supplemented as follows:
For reference only and not as a component of its fairness analysis, J.P. Morgan reviewed the nine publicly available
equity research analyst price targets for FSK Common Stock and noted that the range of such price targets was $15.50 per share to $22.00 per share with a consensus median of $17.25 per share, and compared that price target range to the closing price
per share of FSK Common Stock of $16.75 on November 18, 2020.
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The third sentence of the second paragraph on page 54 of the Proxy Statement is supplemented as follows:
In this analysis, RBCCM compared, among other things, (1) multiple of price per share of common stock to Book Value and (2) 2021E Dividend
Yield, in each case as published by Factset Research Systems.
The first sentence of the third paragraph on page 55 of the Proxy Statement is
supplemented as follows:
RBCCM used discount rates ranging from 10.0% to 12.0%, which range was selected by RBCCM in its professional judgment,
based on an estimated cost of equity using CAPM, as well as applying a size premium, and a terminal value at the end of the forecast period, using terminal multiples ranging from 0.60x to 1.00x based on estimated Book Value per share of common
stock as of December 31, 2025.
The third sentence of the fourth paragraph on page 55 of the Proxy Statement is supplemented as follows:
In this analysis, RBCCM compared, among other things, (a) multiple of price per share of common stock to Book Value and (b) 2021E Dividend Yield, in
each case as published by Factset Research Systems.
The first sentence of the third paragraph on page 56 of the Proxy Statement is supplemented as
follows:
RBCCM used discount rates ranging from 10.0% to 12.0%, which range was selected by RBCCM in its professional judgment, based on an
estimated cost of equity using CAPM, as well as applying a size premium, and a terminal value at the end of the forecast period, using terminal multiples ranging from 0.60x to 1.00x based on estimated Book Value per share of common stock as of
December 31, 2025.
FORWARD-LOOKING STATEMENTS
Statements included herein may constitute “forward-looking” statements as that term is defined in Section 27A of the Securities Act of 1933, as
amended (the “Securities Act”), and Section 21E of the Exchange Act, as amended by the Private Securities Litigation Reform Act of 1995, including statements with regard to future events or the future performance or operations of the
Funds. Words such as “believes,” “expects,” “projects,” and “future” or similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to the inherent
uncertainties in predicting future results and conditions. Certain factors could cause actual results to differ materially from those projected in these forward-looking statements. Factors that could cause actual results to differ materially include
changes in the economy, risks associated with possible disruption to a Fund’s operations or the economy generally due to terrorism, natural disasters or pandemics such as COVID-19, future changes in laws
or regulations and conditions in a Fund’s operating area, failure to obtain requisite stockholder approval for the Proposals (as defined below) set forth in the Proxy Statement, failure to consummate the business combination transaction
involving the Funds, the price at which shares of FSK’s and FSKR’s common stock trade on the New York Stock Exchange, uncertainties as to the timing of the consummation of the business combination transaction involving the Funds,
unexpected costs, charges or expenses resulting from the business combination transaction involving the Funds and failure to realize the anticipated benefits of the business combination transaction involving the Funds. Some of these factors are
enumerated in the filings the Funds made with the SEC, including the Proxy Statement. The inclusion of forward-looking statements should not be regarded as a representation that any plans, estimates or expectations will be achieved. Any
forward-looking statements speak only as of the date of this communication. Except as required by federal securities laws, the Funds undertake no obligation to update or revise any forward-looking statements, whether as a result of new information,
future events or otherwise. Readers are cautioned not to place undue reliance on any of these forward-looking statements
Additional Information and
Where to Find It
This communication relates to a proposed business combination involving the Funds, along with related proposals for which stockholder
approval will be sought (collectively, the “Proposals”). In connection with the Proposals, the Funds have filed relevant materials with the SEC, including the Proxy Statement. The Proxy Statement was mailed to stockholders of each of the
Funds on or about March 2, 2021. This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. No offer of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the Securities Act. STOCKHOLDERS OF THE FUNDS ARE URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE PROXY STATEMENT WHEN IT BECOMES AVAILABLE, AS WELL AS ANY
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AMENDMENTS OR SUPPLEMENTS THERETO, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE FUNDS, THE BUSINESS COMBINATION TRANSACTION INVOLVING THE FUNDS AND THE PROPOSALS. Investors and
security holders will be able to obtain the documents filed with the SEC free of charge at the SEC’s web site, http://www.sec.gov, FSK’s website, https://www.fskkradvisor.com/fsk or FSKR’s website, https://www.fskkradvisor.com/fskr.
Participants in the Solicitation
The Funds and
their respective directors, executive officers and certain other members of management and employees, including employees of FS/KKR Advisor, FS Investments, KKR Credit Advisors (US) LLC and their respective affiliates, may be deemed to be
participants in the solicitation of proxies from the stockholders of the Funds in connection with the Proposals. Information regarding the persons who may, under the rules of the SEC, be considered participants in the solicitation of the Funds’
stockholders in connection with the Proposals are contained in the Proxy Statement and other relevant materials filed with the SEC. This document may be obtained free of charge from the sources indicated above.
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