8-K: Blue Owl Capital Addresses Shareholder Concerns with Supplemental Merger Disclosures

Blue Owl Capital Corporation (OBDC) and Blue Owl Capital Corporation III (OBDE) have issued supplemental disclosures to their joint proxy statement regarding their planned merger, addressing shareholder concerns about potentially misleading statements.

Summary

• Blue Owl Capital Corporation (OBDC) and Blue Owl Capital Corporation III (OBDE) are proceeding with their planned merger, despite receiving demand letters from purported shareholders alleging that the initial registration statement contained misleading information.
• To mitigate potential litigation costs, risks, and uncertainties, OBDC and OBDE have voluntarily supplemented their joint proxy statement with additional disclosures.
• These supplemental disclosures do not affect the timing of the Special Meeting or the merger consideration to be received by OBDE shareholders.
• OBDE will declare a dividend to its shareholders equal to any undistributed net investment company taxable income and net realized capital gain, estimated to be $0.19 per share, in addition to $0.24 per share of unpaid special dividends as of June 30, 2024.
• OBDE has also declared a special dividend of $0.52 per share, payable in cash on or before January 31, 2025, to shareholders of record as of December 31, 2024.
• The OBDC Board authorized a Special Committee to analyze and evaluate the proposed merger, ensuring fairness to all OBDC shareholders.
• Both OBDC and OBDE provided unaudited forecasted financial information to their respective Special Committees and financial advisors for evaluation of the merger.
• Estimated future quarterly dividends of OBDC through December 31, 2029, are projected to be $456.0 million for the nine months ended December 31, 2025, $592.4 million for 2026, $588.5 million for 2027, $592.4 million for 2028 and $600.2 million for 2029.
• Estimated future quarterly dividends of OBDE through December 31, 2029, are projected to be $137.8 million for the nine months ended December 31, 2025, $174.5 million for 2026, $175.3 million for 2027, $176.1 million for 2028 and $176.8 million for 2029.
• The estimated NAV of OBDC is projected to be $6,279.1 million as of December 31, 2029, and the estimated NAV of OBDE is projected to be $1,993.1 million as of December 31, 2029.
• BofA Securities and KBW performed dividend discount analyses to estimate the implied per share equity value of OBDC and OBDE, respectively.
• The supplemental disclosures include updated tables comparing OBDC and OBDE to selected publicly traded companies based on price-to-NAV, dividend yield, and price-to-NII multiples.
• Several financial institutions, including Truist Securities, ING Capital LLC, MUFG, and SMBC Nikko Securities America, Inc., have provided various financial services to OBDC, OBDE, and their affiliates.

Sentiment

Score: 6

Explanation: The sentiment is neutral to slightly positive. While the document addresses shareholder concerns and provides additional information, it also acknowledges potential risks and uncertainties. The proactive approach to disclosures is a positive sign, but the underlying issues of shareholder concerns and potential litigation temper the overall sentiment.

Positives

• The company is proactively addressing shareholder concerns by providing supplemental disclosures.
• The special dividend of $0.52 per share for OBDE shareholders provides immediate value.
• The OBDC Special Committee, composed of independent directors, is focused on ensuring the merger is fair to all shareholders.
• The document provides detailed financial projections and analysis, including dividend discount analysis and comparisons to other publicly traded companies.
• The supplemental disclosures do not affect the timing of the Special Meeting or the merger consideration.

Negatives

• The demand letters from purported shareholders indicate potential dissatisfaction or concerns about the merger.
• The need for supplemental disclosures suggests that the initial registration statement may have been incomplete or unclear.
• The document acknowledges the inherent uncertainty of the underlying assumptions and estimates in the financial projections.
• The document states that the financial projections are not necessarily predictive of actual future results.

Risks

• The merger faces potential litigation from shareholders who believe the initial disclosures were misleading.
• The financial projections are based on numerous assumptions and estimates that may not materialize.
• The document acknowledges that actual results could vary significantly from the prospective financial information.
• The merger's success depends on the ability to realize the anticipated benefits, which is not guaranteed.
• The document highlights potential conflicts of interest with OBDC Adviser.

Future Outlook

The document includes forward-looking statements regarding the merger and future performance, but cautions that actual results may differ materially due to various risks and uncertainties. The company does not intend to update these statements.

Management Comments

• The OBDC Board, including all independent directors, continues to unanimously recommend that OBDC's shareholders vote for the merger stock issuance proposal.
• OBDC and OBDE believe the shareholder claims are without merit, but are supplementing disclosures to reduce potential litigation costs.
• The supplemental disclosures will not affect the merger consideration to be received by OBDE's shareholders.

Industry Context

This announcement is related to the ongoing trend of mergers and acquisitions within the financial sector, particularly among business development companies (BDCs). The document provides detailed financial analysis and comparisons to other publicly traded BDCs, indicating a focus on valuation and shareholder value.

Comparison to Industry Standards

• The document compares OBDC and OBDE to several publicly traded BDCs, including Golub Capital BDC Inc., Sixth Street Specialty Lending Inc., Goldman Sachs BDC Inc., Oaktree Specialty Lending Corporation, New Mountain Finance Corporation, Bain Capital Specialty Finance Inc., and Barings BDC Inc.
• The analysis includes metrics such as Price/NAV, Dividend Yield, Price/CY 2024E NII, and Price/CY 2025E NII, providing a benchmark for assessing the relative valuation of OBDC and OBDE.
• The document also references Ares Capital Corporation, Blackstone Secured Lending Fund, and FS KKR Capital Corporation in its comparative analysis.
• The dividend discount analysis uses discount rates and terminal multiples based on industry standards and the performance of comparable companies.

Legal Proceedings

• OBDC and OBDE received demand letters from purported shareholders alleging that the registration statement contained materially misleading and incomplete statements.
• The companies believe these claims are without merit but are supplementing disclosures to reduce potential litigation costs.

Related Party Transactions

• Truist Securities and its affiliates have been lenders to OBDC, Blue Owl, and affiliated entities, and have served as financial advisor to Blue Owl in connection with an acquisition.
• ING Capital LLC has been a lender to OBDC, OTF, OTF II, OCIC, and an affiliate entity of Blue Owl.
• MUFG has served as a lender to OBDC, OBDE, and other affiliated entities, and has provided various financial services.
• SMBC Nikko Securities America, Inc. and its affiliates have provided and may continue to provide investment banking, commercial banking, and other financial services to OBDC, OBDE, Blue Owl, and their affiliates.

Stakeholder Impact

• Shareholders of OBDC and OBDE are directly impacted by the merger and the supplemental disclosures.
• OBDE shareholders will receive a special dividend and additional undistributed income.
• The merger could impact the trading price of OBDC's common stock.
• The document highlights potential conflicts of interest with OBDC Adviser, which could affect stakeholders.

Next Steps

• OBDC and OBDE shareholders are urged to read the supplemental disclosures and the joint proxy statement carefully before voting.
• The Special Meeting to vote on the merger will proceed as scheduled.
• The merger is expected to close after shareholder approval and satisfaction of other closing conditions.

Key Dates

Keywords

Merger, Shareholder, Dividend, Financial Projections, Valuation, Special Committee, Proxy Statement, Net Asset Value, Discount Analysis, Litigation