Logan Ridge Finance Corporation (LRFC), mcap=$55m, price $20.30 vs $19.50

$LRFC pitch:
– BDC that trades at 50% of NAV and is expected to be acquired by its sister company $PTMN.
– Assuming similar dividend yields, the merger would result in a +50% re-rating of LRFC shares.
– A year ago new management team took over the wheel of LRFC.
– The same management team has done an outstanding job at $PTMN organically and grown the company through acquisitions of other BDCs.
– Both LRFC and PTMN are run by the same people, share the same office space/back office/audit firms, have similar boards, and increasingly are investing in the same debt securities.
– The merger between the two seems inevitable, especially given the precedents.

$LRFC valuation:
– In NAV for NAV merger with $PTMN scenario, LRFC trades at an implied 18% dividend yield.
– Rerating to the current 11% dividend yield results in a $30/share price.

Exp. gain: +50% to $30/share.

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