8-K: North Haven Private Income Fund to Acquire SL Investment Corp in All-Cash Deal

North Haven Private Income Fund (PIF) will acquire SL Investment Corp (SLIC) in an all-cash transaction, pending SLIC stockholder approval and customary closing conditions.

Summary

• North Haven Private Income Fund LLC (PIF) has agreed to acquire SL Investment Corp. (SLIC) in a merger transaction.
• The deal involves PIF acquiring all outstanding shares of SLIC for cash, with the price per share based on SLIC's net asset value (NAV) at the time of closing.
• The transaction is expected to close in the third quarter of 2024, subject to SLIC stockholder approval and other customary closing conditions.
• Post-merger, PIF's total assets are projected to reach $5.0 billion, with investments in approximately 269 portfolio companies.
• The boards of directors of both PIF and SLIC have approved the merger, with unanimous support from their respective independent directors.

Sentiment

Score: 8

Explanation: The document conveys a positive outlook due to the expected benefits of the merger, including increased scale, diversification, and improved returns. The all-cash nature of the deal also provides certainty for SLIC shareholders. However, the document also acknowledges risks and uncertainties, preventing a perfect score.

Positives

• The merger is expected to provide PIF with increased scale and portfolio diversification.
• PIF will acquire a known, diversified portfolio of assets with significant overlap with its existing portfolio.
• The transaction is expected to improve PIF's leverage and funding profile.
• The merger is expected to be accretive to PIF's return profile.
• SLIC stockholders will receive immediate liquidity and certainty of value through the all-cash transaction.

Risks

• The transaction is subject to SLIC stockholder approval and customary regulatory approvals.
• There is a risk that the various conditions to the consummation of the transaction may not be satisfied or waived.
• The transaction could divert management's attention from ongoing business operations.
• There is a risk of stockholder litigation in connection with the transaction, which could result in significant costs.
• General economic, political, and industry trends could impact the success of the merger.
• Changes in the interest rate environment or financial markets could affect the value of PIF's or SLIC's assets.
• The transaction is subject to the risk of disruptions in the operations of PIF and SLIC or the economy generally, including disruptions from the impact of global health events.

Future Outlook

The transaction is expected to close in the third calendar quarter of 2024, subject to SLIC stockholder approval, customary regulatory approvals, and other closing conditions. PIF expects to maintain significant liquidity post-transaction.

Management Comments

• Jeffrey Levin, President and Chief Executive Officer of PIF and SLIC, stated that they are pleased with the performance of both funds and excited to be delivering value for the investors of both entities with this transaction.
• He also noted that the transaction will provide PIF with greater scale and be meaningfully accretive to PIF's net investment income per share and will provide immediate liquidity to SLIC stockholders.

Industry Context

This merger reflects a trend of consolidation within the business development company (BDC) sector, where companies seek to achieve greater scale and efficiency. The transaction is also consistent with the broader trend of private credit funds seeking to enhance returns through increased leverage and diversification.

Comparison to Industry Standards

• The merger between PIF and SLIC is similar to other BDC mergers in that it aims to create a larger, more diversified entity with improved access to capital.
• The increase in PIF's leverage ratio to 0.84x is within the range of leverage ratios seen in other BDCs, although it represents a significant increase for PIF.
• The projected 150 bps improvement in net investment income is a significant benefit, and if achieved, would place PIF among the higher-performing BDCs in terms of return on equity.
• The all-cash nature of the transaction is a common approach in BDC mergers, providing immediate liquidity to the acquired company's shareholders.

Stakeholder Impact

• SLIC stockholders will receive immediate liquidity through the all-cash transaction.
• PIF investors are expected to benefit from increased scale, diversification, and improved returns.
• The transaction is expected to create a more efficient and competitive entity.

Next Steps

• SLIC will seek stockholder approval for the merger.
• The parties will work to obtain customary regulatory approvals.
• The transaction is expected to close in the third quarter of 2024.

Key Dates

Keywords

merger, acquisition, business development company, BDC, private income fund, net asset value, NAV, leverage, portfolio diversification, investment income