Allied CapitalAllied Capital, parent company of national distributor Stag-Parkway, today (Thursday) issued a letter responding to Prospect Capital’s offer to buy the company. Currently, Allied is seeking to be acquired by rival private investment firm Ares Capital Corp.

In its response to Prospect’s letter, Allied said that it reviewed Prospect’s offer, and that “as a result of this review, Allied’s Board of Directors has unanimously concluded that this revised offer does not constitute, and is not reasonably likely to result in, a ‘superior proposal’ as defined under our merger agreement with Ares Capital Corp. Allied’s Board of Directors has unanimously reaffirmed its recommendation that Allied shareholders vote for the transaction with Ares announced on Oct. 26, 2009.”

In its response, Allied spelled out in detail why it was rejecting Prospect’s offer. Among those reasons, Allied said it believes Prospect has limited liquidity to operate the combined business, that Prospects lacks the managerial experience to run the combined company, that there is no assurance that an agreement with Prospect could be reached or closed, and that it believes combining with Prospect would mean its shareholders would be inheriting a much riskier portfolio.