Blue Owl Capital Corporation and Blue Owl Capital Corporation III Announce Merger Agreement
Merger of two high-quality, diversified portfolios with substantial investment overlap significantly enhances scale
Will create
second largest publicly traded BDC by total assets, with
Key Transaction Highlights
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Acquisition of a Known, High-Quality Portfolio of Assets – OBDC and OBDE employ the same investment strategy, and
("Blue Owl") has been allocating the same investments to both funds since OBDE's inception. As a result, approximately 90% of the investments in OBDE overlap with those of OBDC. The combination of two known, complementary portfolios, constructed and managed by the same centralized team, will facilitate portfolio consolidation and meaningfully mitigate potential integration risk.Blue Owl Capital Inc .
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Increased Scale and Diversification – The proposed merger will increase OBDC's total investments by approximately 30%, meaningfully increasing the combined company's scale. OBDC's investment portfolio on a pro forma basis at fair value is expected to increase to approximately
$17.7 billion across 256 portfolio companies with an average position size of 0.4% as ofJune 30, 2024 . Diversification is also critical to risk mitigation, reducing reliance on the success of any one investment, and this proposed merger strengthens that effort. The combined company is expected to be the second largest externally managed, publicly traded BDC by total assets.
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Improved Secondary Market Liquidity – The increased market capitalization following the proposed merger may result in enhanced trading liquidity and potential for greater institutional ownership. Elimination of a second diversified publicly traded BDC reduces arbitrage opportunities while streamlining Blue Owl BDCs' organizational structure.
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Well-Balanced Capital Structure and Increased Access to Long-Term, Low-Cost,
Flexible Debt Capital – The increased scale of the combined company may create potential for more diverse funding sources, while consolidating existing facilities. Greater scale and structural simplification could improve cost of debt and allow for more favorable financing terms over time. The combined company may benefit from OBDC's higher investment grade credit ratings to drive additional funding cost savings.
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Accretive to Net Investment Income ("NII") – The proposed merger is expected to be accretive to NII over time, driven by operational savings through the elimination of duplicative expenses, which both OBDC and OBDE estimate could be in excess of
$5 million in the first year. Additionally, NII should benefit further from incremental yield through portfolio mix optimization and cost savings from capital structure improvements over the long-term.
- Opportunity for Net Asset Value ("NAV") Per Share Accretion – The terms of the transaction allow for potential NAV per share accretion to OBDC if shares of OBDC are trading above OBDC's NAV per share at the time of closing. Additionally, the structure allows for OBDE shareholder consideration to be valued at a potential premium to OBDE's NAV per share if shares of OBDC are trading above OBDC's NAV per share at the time of closing.
Exchange Ratio
Under the terms of the proposed merger, shareholders of OBDE will receive newly issued shares of OBDC for each share of OBDE based on the Exchange Ratio determined prior to closing. The Exchange Ratio will be calculated based upon (i) the NAV per share of OBDC and OBDE, each determined before merger close and (ii) the market price of OBDC common stock ("OBDC Price") before merger close. Formulaically, the Exchange Ratio will be determined as follows.
Scenario |
OBDC Price / OBDC |
Exchange Ratio |
1 |
≤ 100% |
OBDE NAV per share / OBDC NAV per share |
2 |
100% to 104.5% |
(OBDE NAV per share x (1 + 50% x (OBDC Price / OBDC NAV |
3 |
> 104.5% |
OBDE NAV per share x 102.25% / OBDC Price |
Additional Transaction Details
In connection with and in support of the transaction, only if the proposed merger is consummated, OBDC's advisor,
Prior to the anticipated closing of the proposed merger, OBDC and OBDE intend to declare and pay ordinary course quarterly dividends.
Prior to the closing of the proposed merger, subject to the approval of OBDE's board of directors, OBDE will declare a dividend to OBDE's shareholders equal to any undistributed net investment income estimated to be remaining as of the closing of the proposed merger. This will include any unpaid special dividends previously declared in conjunction with OBDE's listing in
If the merger closes prior to
Following the closing of the proposed merger, OBDC's existing
The combined company will be externally managed by
Completion of the proposed merger is subject to OBDC and OBDE shareholder approvals, customary regulatory approvals and other customary closing conditions. Assuming satisfaction of these conditions, the transaction is expected to close in the first quarter of 2025.
Advisors
Conference Calls
OBDC will hold a conference call to discuss the merger and its second quarter 2024 financial results at 10:00 a.m. Eastern Time on
OBDC Call Details
A live webcast will be available on the Events section of OBDC's website at www.blueowlcapitalcorporation.com. Please visit the website to test your connection before the webcast.
Participants are also invited to access the conference call by dialing one of the following numbers:
Domestic: (877) 737-7048
International: +1 (201) 689-8523
All callers will need to reference "
OBDE Call Details
A live webcast will be available on the Events section of OBDE's website at www.blueowlcapitalcorporationiii.com. Please visit the website to test your connection before the webcast.
Participants are also invited to access the conference call by dialing one of the following numbers:
Domestic: (877) 407-9714
International: +1 (201) 689-8865
All callers will need to reference "
About
Blue
About Blue Owl Capital Corporation III
Blue Owl Capital Corporation III (NYSE: OBDE) is a specialty finance company focused on lending to
Forward-Looking Statements
Some of the statements in this press release constitute forward-looking statements because they relate to future events, future performance or financial condition of OBDC or OBDE or the two-step merger (collectively, the "Mergers") of OBDE with and into OBDC. The forward-looking statements may include statements as to: future operating results of OBDC and OBDE and distribution projections; business prospects of OBDC and OBDE and the prospects of their portfolio companies; and the impact of the investments that OBDC and OBDE expect to make. In addition, words such as "anticipate," "believe," "expect," "seek," "plan," "should," "estimate," "project" and "intend" indicate forward-looking statements, although not all forward-looking statements include these words. The forward-looking statements contained in this press release involve risks and uncertainties. Certain factors could cause actual results and conditions to differ materially from those projected, including the uncertainties associated with (i) the timing or likelihood of the Mergers closing; (ii) the expected synergies and savings associated with the Mergers; (iii) the ability to realize the anticipated benefits of the Mergers, including the expected accretion to net investment income and the elimination or reduction of certain expenses and costs due to the Mergers; (iv) the percentage of OBDC and OBDE shareholders voting in favor of the proposals submitted for their approval; (v) the possibility that competing offers or acquisition proposals will be made; (vi) the possibility that any or all of the various conditions to the consummation of the Mergers may not be satisfied or waived; (vii) risks related to diverting management's attention from ongoing business operations; (viii) the risk that shareholder litigation in connection with the Mergers may result in significant costs of defense and liability; (ix) changes in the economy, financial markets and political environment; (x) the impact of geo-political conditions, including revolution, insurgency, terrorism or war, including those arising out of the ongoing war between
Additional Information and Where to Find It
In connection with the Mergers, OBDC and OBDE plan to file with the
Participation in the Solicitation
OBDC, its directors, certain of its executive officers and certain employees and officers of
Investor Contact:
BDC Investor Relations
michael.mosticchio@blueowl.com
Media Contact:
pro-blueowl@prosek.com
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