Deerfield Capital to merge with Commercial Industrial Finance

By Melissa Kory

Cleveland, Dec. 21 - Deerfield Capital Corp. and Commercial Industrial Finance Corp. announced their entry into a definitive agreement to merge.

The merger, which is subject to closing conditions, including approval by Deerfield's stockholders, is expected to close in the first part of 2011.

Following the merger, Peter Gleysteen, the chief executive officer of CIFC, will become the chief executive officer. Jonathan Trutter, the chief executive officer of Deerfield, will become vice chairman of the combined company.

The combined company will be based in New York and maintain operations in Chicago.

"The combination of DFR and CIFC will create one of the world's largest structured credit and leveraged finance investment managers," Trutter said in a news release. "Combining the two companies will allow management to focus on implementing the best attributes from both companies."

As consideration for the merger, CIFC's owner, CIFC Parent Holdings, will receive 9,090,909 shares of newly issued Deerfield common stock and $7.5 million of cash in three equal installments.

Deerfield, through its subsidiaries Deerfield Capital Management LLC and Columbus Nova Credit Investments Management, LLC, has $9.4 billion of assets under management as of Dec. 1. Bounty Investments, LLC, an investment vehicle managed by Renova U.S. Management LLC, owns 40% of the outstanding common stock of Deerfield.

The merger will result in combined assets under management of $15.6 billion, including collateralized loan obligations of $11.7 billion.

Renova has signed a voting agreement supporting the merger.

Following the merger CIFC Parent Holdings will own 36.9%, Renova will own 35.2% and public stockholders and management will own 27.9% of Deerfield's common stock.

Deerfield will elect to be a controlled company under Nasdaq rules, and its board of directors will be expanded to 11 members and will include three members designated by CIFC Parent Holdings, three members designated by Renova, three independent directors, as well as Gleysteen and Trutter.

"The combined company will be well-positioned for growth at a point of newly expanding opportunities for credit based asset management products, particularly loans," Gleysteen said in a news release.

"It will have a highly differentiated investment model, ample resources and a top track record. While building deeper distribution channels to investors for its products will be a key factor for growth, unrelenting focus on credit selection, investment performance and stewardship of client capital will continue to be our top priorities," Gleysteen said in the release.

Advisors to the special committee of the Deerfield board of directors included Natixis North America LLC, TM Capital Corp. and Weil, Gotshal & Manges LLP. CIFC and Renova were advised on legal matters by Milbank, Tweed, Hadley & McCloy LLP and Latham & Watkins LLP, respectively.

Based in Rosemont, Ill., Deerfield is a fixed-income investment management services company.

Commercial Industrial Finance is a corporate credit asset management business based in New York.

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