US-based speciality finance companies Blue Owl Capital Corporation (OBDC) and Blue Owl Capital Corporation III (OBDE) have agreed to merge, with OBDC as the surviving company.
Under the terms of the merger agreement, OBDE shareholders will receive newly issued shares of OBDC, based on the exchange ratio determined before closing.
The exchange ratio will be calculated based on the NAV per share of OBDC and OBDE and the market price of OBDC common stock before closing.
The boards of directors of both OBDC and OBDE have unanimously approved the transaction, after receiving recommendations from each of their special committees.
The business combination is expected to be closed in the first quarter of 2025, subject to certain shareholder approvals and other customary closing conditions.
OBDC and OBDE CEO Craig Packer said: “We believe now is the right time to deliver long-term value for both OBDC and OBDE shareholders and streamline our direct lending platform.
“The merger is set to enhance scale while preserving our strong credit quality. This increased scale positions the combined company to deliver attractive risk-adjusted returns for shareholders in the years to come.”
If the merger is consummated, OBDC’s advisor Blue Owl Credit Advisors has agreed to reimburse fees and expenses associated with the merger, up to $4.25m.
OBDC and OBDE will declare and pay ordinary course quarterly dividends, before the anticipated closing of the proposed merger.
Upon closing, OBDC’s existing $150m share repurchase program will remain unchanged.
The combined company will be managed by Blue Owl Credit Advisors, and all current OBDC officers and directors will continue in their current roles.
The combined company’s shares will be traded on the New York Stock Exchange (NYSE).
Blue Owl Capital has been allocating the same investments to both funds since their inception, and most of the investments in OBDE overlap with those of OBDC.
The transaction combines two complementary portfolios, created and managed by the same team, enabling the consolidation of portfolios and mitigating potential integration risks.
In addition, the proposed merger is expected to increase OBDC’s total investments by nearly 30% and considerably enhance the combined company’s scale.
BofA Securities and Truist Securities served as lead financial advisors, and ING Financial Markets and MUFG Bank as co-financial advisors to OBDC on this transaction.
Eversheds Sutherland (US) served as legal counsel to the special committee of OBDC.
Keefe, Bruyette & Woods, A Stifel Company, served as a lead financial advisor, and SMBC as co-financial advisor to OBDE, while Stradley Ronon Stevens & Young served as legal counsel to the special committee of OBDE.
Kirkland & Ellis served as legal counsel to the investment advisors of OBDC and OBDE.
