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Rand's biggest shareholder: Don't vote on Pegula deal until you hear us out

Rand Capital Corp.'s biggest shareholder has a message for its fellow investors in the Buffalo venture capital firm: Don't vote on the proposed $25 million deal to sell a majority stake to Terry and Kim Pegula until it details its reasons for opposing the proposal from the Buffalo Bills and Sabres owners.

Bruce Howard, the CEO of User-Friendly Phone Book, which owns a 23 percent stake in Rand, said it plans to file documents soon with the Securities and Exchange Commission, detailing the reasons why it opposes the bid to acquire a 57 percent stake in Rand from the Pegula's East Asset Management.

"You deserve the opportunity to review the information regarding why we believe the terms of the proposed transaction are inadequate and to decide for yourself what best serves your interests," Howard said in a letter to shareholders released Monday.

The Pegula bid, valued at $3 per share, was a 33 percent premium to the value of Rand's shares at the time of the offer, although it is less than the value of Rand's underlying assets. Rand's shares have consistently traded at a deep discount to the value of their underlying assets, and the venture firm's executives have been looking for a way to generate better returns to shareholders.

As part of the deal, Rand also will pay a $1.50 special dividend to its shareholders. The dividend will be paid out in the form of 20 percent cash and 80 percent stock, but Rand's board and management said last week they will take their portion of the special dividend entirely in stock – a move they said indicates their confidence in Rand's future if the deal is approved.

The Howard letter is the latest salvo in the battle among Rand investors over the proposed Pegula bid. While User-Friendly Phone Book's opposition alone is not enough to block the deal, its 23 percent stake puts it nearly halfway toward the 50 percent of all outstanding  shares needed to approve the deal. Rand's officers and directors, who support the deal, hold slightly less than 10 percent of the firm's shares.

"We believe the transaction is in the best interest of all shareholders and enables a future that we expect will be demonstrably better than if we were to maintain the status quo," Rand CEO Pete Grum wrote in a letter to Howard that was disclosed in a regulatory filing on Thursday.

Rand shareholders will vote on the deal at a May 16 shareholder meeting in Buffalo.

Pegulas buying majority stake in Rand Capital for $25 million

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