ZS Crossover wants Capital Southwest to sell some assets, return money to shareholders

By Lisa Kerner

Charlotte, N.C., May 30 - Capital Southwest Corp. shareholders led by Ned Sherwood and ZS Crossover II LP expressed dissatisfaction with the "continued substantial market undervaluation" of the company, blaming Capital Southwest's "poor investment performance history and cavalier valuation procedures."

According to a schedule 13D filing with the Securities and Exchange Commission, the investors suggested:

• The sale of Capital Southwest's $54 million of certain unrestricted public securities, with proceeds distributed to shareholders on a pro rata basis; and

• The registration and distribution of the four major public holdings to shareholders on a pro rata basis.

ZS Crossover believes these two steps would result in a distribution to shareholders of about $82 per share in cash and securities at current market prices, the investor said in a May 29 letter to Capital Southwest included in the SEC filing.

The investors, with a 7.7% stake in the company, said they were disappointed that Capital Southwest chose to fight to exclude ZS Crossover's non-binding proposal from the company's proxy statement.

It was previously reported that the SEC ruled in favor of Capital Southwest's request to exclude the activist shareholder's proposal calling for the Dallas-based investment company to engage an investment banking firm to evaluate alternatives including the liquidation of some or all of the company's assets and the distribution of proceeds to shareholders.

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