8-K: Blue Owl Capital Corporation Completes Merger with Blue Owl Capital Corporation III, Creating Second Largest Publicly Traded BDC

Blue Owl Capital Corporation (OBDC) has finalized its merger with Blue Owl Capital Corporation III (OBDE), establishing OBDC as the second-largest publicly traded Business Development Company (BDC) by total assets.

Summary

• Blue Owl Capital Corporation (OBDC) completed its acquisition of Blue Owl Capital Corporation III (OBDE) on January 13, 2025.
• The merger resulted in OBDE ceasing to exist as a separate entity and merging into OBDC.
• OBDE shareholders received 0.9779 shares of OBDC common stock for each share of OBDE common stock, with cash paid for fractional shares.
• Approximately 120,630,637 shares of OBDC common stock were issued to former OBDE stockholders.
• The combined entity now has $18.6 billion in total assets at fair value and investments in 232 portfolio companies as of September 30, 2024.
• OBDC will continue to trade on the New York Stock Exchange under the ticker OBDC.
• Legacy OBDC shareholders own approximately 76% and former OBDE shareholders own approximately 24% of the combined company.

Sentiment

Score: 8

Explanation: The document conveys a positive sentiment due to the successful completion of the merger, the creation of a larger, more diversified entity, and the expectation of enhanced returns. However, it also acknowledges risks and uncertainties, preventing a perfect score.

Positives

• The merger enhances OBDC's position as a market-leading BDC.
• The merger increases the diversity of the combined portfolio.
• The combined company maintains strong credit quality.
• The merger is expected to deliver attractive risk-adjusted returns.
• The combined company has enhanced scale.

Risks

• The ability to realize the anticipated benefits of the merger is uncertain.
• The merger could divert management's attention from ongoing business operations.
• Shareholder litigation related to the merger could result in significant costs.
• Changes in the economy, financial markets, and political environment could impact the company.
• Geopolitical conditions, including the war in Ukraine and the conflict in the Middle East, could affect the company.
• Future changes in laws or regulations could impact the company.
• An economic downturn, elevated interest and inflation rates, and supply chain disruptions could impact the company.
• The ability of Blue Owl Credit Advisors LLC to locate suitable investments and manage them is a risk.
• The ability of Blue Owl Credit Advisors LLC to attract and retain talented professionals is a risk.

Future Outlook

The combined company will seek to leverage its enhanced scale to deliver attractive risk-adjusted returns in the near term and across all economic environments.

Management Comments

• Craig W. Packer, Chief Executive Officer of OBDC, stated that the merger enhances OBDC's position as a market-leading BDC while increasing portfolio diversity and maintaining strong credit quality.
• Management thanked shareholders for their support in completing the transaction.

Industry Context

This merger consolidates two significant players in the Business Development Company (BDC) sector, creating a larger entity with increased scale and market presence. This is part of a trend of consolidation in the BDC space as companies seek to improve efficiency and access to capital.

Comparison to Industry Standards

• With $18.6 billion in total assets, the combined OBDC is now the second-largest publicly traded BDC, placing it among the largest players in the sector.
• Competitors such as Ares Capital Corporation (ARCC) and Main Street Capital Corporation (MAIN) are also large BDCs, but the merger positions OBDC to compete more effectively with these established players.
• The merger is expected to improve OBDC's operational efficiency and potentially lower its cost of capital, which are key metrics for BDCs.
• The combined portfolio of 232 companies provides a diversified base, which is a positive compared to BDCs with less diversified portfolios.

Management Changes

Corporate Governance

Related Party Transactions

• OBDC's adviser, Blue Owl Credit Advisors LLC, has agreed to reimburse $4.25 million of fees and expenses associated with the merger.

Stakeholder Impact

• Shareholders of OBDE received shares of OBDC, changing their ownership structure.
• The merger is expected to benefit shareholders through enhanced scale and potential for better returns.
• Employees of both companies may experience changes due to the merger.
• The merger could impact the portfolio companies of both OBDC and OBDE.

Next Steps

• The combined company will operate as Blue Owl Capital Corporation and continue to trade under the ticker OBDC on the New York Stock Exchange.
• The company will seek to leverage its enhanced scale to deliver attractive risk-adjusted returns.

Key Dates

Keywords

merger, business development company, BDC, acquisition, Blue Owl Capital Corporation, OBDC, OBDE, assets, portfolio companies, shareholders