Blue Owl Capital announces strategic merger with Blue Owl Capital III

Blue Owl Capital Corporation has entered into a definitive merger agreement with Blue Owl Capital Corporation III. This strategic move, awaiting shareholder and regulatory approval, will position Blue Owl Capital Corporation as the surviving entity. The boards of directors for both companies have unanimously approved the merger following recommendations from their special committees.

Craig W. Packer, CEO of both companies, highlighted the benefits of the merger, stating that it will enhance long-term shareholder value, streamline the direct lending platform, and maintain strong credit quality. He emphasized that the increased scale from the merger will enable the combined company to offer attractive risk-adjusted returns.

Key Transaction Highlights

The merger involves the acquisition of a high-quality portfolio of assets. Blue Owl Capital Corporation and Blue Owl Capital Corporation III follow the same investment strategy, with approximately 90% of their investments overlapping. This alignment will facilitate portfolio consolidation and significantly reduce integration risks.

The merger will increase Blue Owl Capital Corporation’s total investments by about 30%, raising the portfolio’s fair value to approximately $17.7 billion across 256 companies. Enhanced diversification will reduce reliance on any single investment, making the combined entity the second-largest externally managed, publicly traded business development company by total assets.

The anticipated increase in market capitalization is expected to improve trading liquidity and attract greater institutional ownership. Additionally, the merger will eliminate the complexity of managing two diversified publicly traded business development companies, thereby streamlining Blue Owl’s organizational structure.

The combined company’s capital structure will benefit from increased scale, allowing for more diverse funding sources and improved financing terms. This could lead to significant cost savings and more favorable debt terms over time.

The merger is expected to be accretive to net investment income, with estimated operational savings exceeding $5 million in the first year. Further benefits include incremental yield from portfolio optimization and cost savings from an improved capital structure.

The merger terms allow for potential net asset value per share accretion. Shareholders of Blue Owl Capital Corporation III will receive newly issued shares of Blue Owl Capital Corporation based on an exchange ratio determined prior to closing.

Additional Transaction Details

Blue Owl Credit Advisors LLC will reimburse up to $4.25 million in merger-related fees if the merger is consummated. Both companies plan to declare and pay ordinary course quarterly dividends before the merger closes. Blue Owl Capital Corporation III will also declare a dividend to distribute any undistributed net investment income as of the merger closing.

If the merger closes before January 25, 2025, any remaining lock-ups on shares of Blue Owl Capital Corporation III will be waived. The combined company will continue to trade under the ticker “OBDC” on the New York Stock Exchange.

Completion of the merger is subject to shareholder and regulatory approvals and is expected in the first quarter of 2025. BofA Securities and Truist Securities are lead financial advisors for Blue Owl Capital Corporation, while Keefe, Bruyette & Woods and SMBC advise Blue Owl Capital Corporation III. Eversheds Sutherland (US) LLP and Stradley Ronon Stevens & Young LLP are providing legal counsel.

Merger to Drive Value and Growth

Industry experts believe the merger will significantly enhance Blue Owl’s market position. By consolidating assets and improving diversification, the combined company can better navigate market fluctuations and deliver consistent returns. The anticipated operational savings and improved capital structure will likely boost profitability, benefiting shareholders in the long run.