Blue Owl Technology Finance Corp. and Blue Owl Technology Finance Corp. II Announce Merger Agreement
Blue Owl Technology Finance Corp. (OTF) and Blue Owl Technology Finance Corp. II (OTF II) have announced a definitive merger agreement, with OTF as the surviving company. The merger will create one of the largest BDCs and the largest software-focused BDC by total assets. The combined portfolio will have 77% first lien investments and 81% senior secured investments, with pro forma total assets of approximately $15.8 billion. Under the merger terms, OTF II shareholders will receive OTF common stock shares equal to their NAV, resulting in pro forma ownership of 45.3% for OTF shareholders and 54.7% for OTF II shareholders. The transaction is expected to close in Q2 2025.
Blue Owl Technology Finance Corp. (OTF) e Blue Owl Technology Finance Corp. II (OTF II) hanno annunciato un accordo di fusione definitivo, con OTF come azienda risultante. La fusione creerà uno dei BDC più grandi e il più grande BDC focalizzato sul software per attivi totali. Il portafoglio combinato avrà il 77% di investimenti garantiti da primarie e l'81% di investimenti senior garantiti, con attivi totali pro forma di circa 15,8 miliardi di dollari. In base ai termini della fusione, gli azionisti di OTF II riceveranno azioni comuni di OTF equivalenti al loro NAV, risultando in una proprietà pro forma del 45,3% per gli azionisti di OTF e del 54,7% per gli azionisti di OTF II. Si prevede che la transazione si chiuda nel secondo trimestre del 2025.
Blue Owl Technology Finance Corp. (OTF) y Blue Owl Technology Finance Corp. II (OTF II) han anunciado un acuerdo de fusión definitivo, con OTF como la empresa sobreviviente. La fusión creará uno de los BDC más grandes y el BDC más grande enfocado en software por activos totales. El portafolio combinado tendrá un 77% de inversiones en primeros gravámenes y un 81% de inversiones senior aseguradas, con activos totales pro forma de aproximadamente $15.8 mil millones. Según los términos de la fusión, los accionistas de OTF II recibirán acciones comunes de OTF equivalentes a su NAV, lo que resultará en una propiedad pro forma del 45.3% para los accionistas de OTF y del 54.7% para los accionistas de OTF II. Se espera que la transacción se cierre en el segundo trimestre de 2025.
블루 오울 테크놀로지 파이낸스 주식회사 (OTF)와 블루 오울 테크놀로지 파이낸스 주식회사 II (OTF II)가 OTF를 생존 회사로 하는 합병 계약을 발표했습니다. 이번 합병은 총 자산 기준으로 가장 큰 소프트웨어 중심 BDC 중 하나를 만들 것입니다. 통합된 포트폴리오는 77%의 1순위 투자 및 81%의 선순위 담보 투자를 보유하게 되며, pro forma 총 자산은 약 158억 달러에 달합니다. 합병 조건에 따라 OTF II 주주들은 그들의 NAV에 해당하는 OTF 보통주를 받게 되어 OTF 주주의 45.3% 및 OTF II 주주의 54.7%의 pro forma 소유권이 발생합니다. 거래는 2025년 2분기 안에 마감될 것으로 예상됩니다.
Blue Owl Technology Finance Corp. (OTF) et Blue Owl Technology Finance Corp. II (OTF II) ont annoncé un accord de fusion définitif, OTF étant l'entreprise survivante. La fusion créera l'un des plus grands BDC et le plus grand BDC axé sur le logiciel en termes d'actifs totaux. Le portefeuille combiné comprendra 77 % d'investissements garantis en première hypothèque et 81 % d'investissements senior garantis, avec des actifs totaux pro forma d'environ 15,8 milliards de dollars. Selon les modalités de la fusion, les actionnaires d'OTF II recevront des actions ordinaires d'OTF équivalentes à leur NAV, ce qui se traduira par une propriété pro forma de 45,3 % pour les actionnaires d'OTF et de 54,7 % pour ceux d'OTF II. La transaction devrait être finalisée au cours du deuxième trimestre de 2025.
Blue Owl Technology Finance Corp. (OTF) und Blue Owl Technology Finance Corp. II (OTF II) haben eine definitive Fusionsvereinbarung angekündigt, wobei OTF das überlebende Unternehmen ist. Die Fusion wird einen der größten BDCs und den größten softwarefokussierten BDC nach Gesamtvermögen schaffen. Das kombinierte Portfolio wird 77% Ersthypothekeninvestitionen und 81% senior gesicherte Investitionen umfassen, mit pro forma Gesamtvermögen von etwa 15,8 Milliarden Dollar. Nach den Bedingungen der Fusion erhalten die OTF II Aktionäre OTF Stammaktien, die ihrem NAV entsprechen, was zu einem pro forma Eigentum von 45,3% für die OTF Aktionäre und 54,7% für die OTF II Aktionäre führt. Die Transaktion wird voraussichtlich im zweiten Quartal 2025 abgeschlossen sein.
- Expected to be accretive to net investment income
- Estimated $4 million in operational savings in first year
- Projected $15 million annual financing cost savings long-term
- 84% investment overlap between portfolios reduces integration risk
- Combined portfolio shows strong credit quality with <0.1% non-accrual investments
- Scale increase to $15.8 billion in total assets
- $300 million in undistributed net investment income and capital gains
- Transaction subject to shareholder and regulatory approvals
- Integration costs and expenses up to $4.75 million
Insights
This merger represents a significant strategic move in the BDC sector, creating one of the largest software-focused Business Development Companies with
The combined entity's portfolio metrics are robust, with
The transaction positions the combined entity favorably for a potential public listing, with
This consolidation significantly strengthens Blue Owl's competitive position in the specialized software lending market. The increased scale will likely enhance market influence and deal flow access, while the simplified organizational structure should improve operational efficiency and market perception.
The timing is strategic, capitalizing on the growing demand for software industry financing while building a more resilient platform through enhanced diversification. The combined entity's improved debt market access and potential for more favorable financing terms could create a sustainable competitive advantage in the BDC space.
The transaction's structure, maintaining the same management team and investment strategy, ensures continuity while leveraging economies of scale. This positions the merged entity as a dominant player in software lending, potentially attracting greater institutional interest and research coverage post-public listing.
Merger of two high-quality, diversified software-focused portfolios with substantial investment overlap significantly enhances scale
Expected to create one of the largest BDCs and the largest dedicated software-focused BDC by total assets1
Craig W. Packer, Chief Executive Officer of OTF and OTF II said, "Through this transaction, Blue Owl will create what will be the largest BDC with a software lending focus and one of the largest BDCs in the market overall. Our innovative investment strategy in this vertical has been a success, and we believe the conditions are right to increase the scale of the combined company as we seek to create long-term value for both sets of shareholders. This transaction is expected to be accretive to net investment income for both OTF and OTF II and materially enhance our position for a potential liquidity event in the future."
Erik Bissonnette, President of OTF and OTF II commented, "Since launching our software strategy in 2018, we have delivered strong portfolio performance, excellent credit quality and attractive returns to shareholders. We are proud of our accomplishments and excited for this milestone merger agreement between two high-quality, software-focused BDCs."
Key Transaction Highlights
- Acquisition of a Known, High-Quality Portfolio of Assets – OTF and OTF II employ the same investment strategy, and Blue Owl Capital Inc. ("Blue Owl") has been allocating substantially the same investments to both funds since OTF II's inception. As a result, as of September 30, 2024, approximately
84% of the investments in OTF II overlap with those of OTF. The combination of two known, complementary portfolios, constructed and managed by the same centralized team, should facilitate portfolio consolidation and meaningfully mitigate potential integration risk. - Strong Combined Portfolio Company Metrics – The combined portfolio would have an asset mix on a combined basis with
77% first lien investments and81% senior secured investments as of September 30, 2024. As of September 30, 2024, the combined portfolio would also maintain excellent credit quality, with less than0.1% of total investments at fair value on non-accrual and93% of investments in our highest two internal ratings categories based on fair value2. - Increased Scale and Diversification – The proposed merger would increase OTF's total investments by greater than
100% at its target leverage range of 0.90x – 1.25x, meaningfully increasing the combined company's scale. OTF's total assets on a pro forma basis are expected to increase to approximately as of September 30, 2024, which would make the combined company a top five BDC and the largest dedicated software-focused BDC by total assets once all capital is called and the fund reaches target leverage1. The proposed combination would also increase the number of portfolio companies to 180 and reduce the average position size within the portfolio to less than$15.8 billion 0.6% at fair value as of September 30, 2024. Diversification is critical to risk mitigation, reducing reliance on the success of any one investment, and this proposed merger strengthens that effort. - Enhanced Positioning for a Possible Future Liquidity Event – Subsequent to the transaction, should the combined company pursue a possible future liquidity event, OTF is expected to have a more attractive profile than either BDC on a standalone basis in the public markets. The larger scale of the combined company is expected to increase possible trading liquidity, broaden investor appeal and expand prospective research coverage. Additionally, the elimination of a second private-to-public software-focused BDC should reduce potential arbitrage opportunities while streamlining Blue Owl BDC's organizational structure. Finally, the combined company would have nearly
in undistributed net investment income and undistributed net capital gains as of September 30, 2024, which should support a strong and predictable potential future public company dividend.$300 million - Greater Access to Debt Markets and Financing Cost Savings – Greater scale and structural simplification could improve the cost of debt and allow for more favorable financing terms over time. Additionally, the increased scale of the combined company may lead to more diverse funding sources while consolidating existing facilities.
- Accretive to Net Investment Income ("NII") – Shareholders of the combined company should benefit from operational savings through the elimination of duplicative expenses, which are estimated to be more than
in the first year, a lower cost of financing, which is estimated to save$4 million annually in the long-term, and improved portfolio-level asset yields. Further, we expect there should be an opportunity to further enhance ROE as the fund ramps to its target leverage range of 0.90x – 1.25x.$15 million
Exchange Ratio
Under the terms of the proposed merger, shareholders of OTF II will receive an amount of shares of OTF common stock with a net asset value ("NAV") equal to the NAV of shares of OTF II common stock that they hold at the time of closing. The exchange ratio will result in an ownership split of the combined company based on the respective NAVs of each of OTF and OTF II, each determined prior to closing. For illustrative purposes, based on September 30, 2024 NAVs assuming all remaining OTF II capital commitments are called, and excluding transaction costs net of adviser reimbursement and tax-related distributions, OTF would issue approximately 0.9305 shares of its common stock for each share of OTF II common stock outstanding, resulting in pro forma ownership of
Additional Transaction Details
In connection with and in support of the transaction, only if the proposed merger is consummated, OTF's advisor, Blue Owl Technology Credit Advisors LLC, has agreed to reimburse fees and expenses associated with the merger up to a cap of
Prior to the anticipated closing of the proposed merger, OTF and OTF II intend to declare and pay ordinary course quarterly dividends.
Prior to the closing of the proposed merger, subject to the approval of OTF II's board of directors, OTF II will declare a dividend to OTF II's shareholders equal to any undistributed net investment income and undistributed net capital gains estimated to be remaining as of the closing of the proposed merger.
The combined company will be externally managed by Blue Owl Technology Credit Advisors LLC, and all current OTF officers and directors will remain in their current roles.
Completion of the proposed merger is subject to OTF and OTF II shareholder approvals, customary regulatory approvals and other customary closing conditions. Assuming satisfaction of these conditions, the transaction is expected to close in the second quarter of 2025.
For more information on the merger, visit blueowlproducts.com/otf-otf-ii-merger.
Advisors
RBC Capital Markets and Truist Securities are serving as lead financial advisors to the special committee of independent directors of OTF in connection with the transaction. ING Financial Markets LLC and SMBC are also acting as co-financial advisors to the special committee of independent directors of OTF. Eversheds Sutherland (US) LLP is acting as the legal counsel to the special committee of independent directors of OTF.
Morgan Stanley & Co. LLC and Greenhill, a Mizuho affiliate, are serving as lead financial advisors to the special committee of independent directors of OTF II. MUFG Bank, Ltd is also acting as co-financial advisor to the special committee of independent directors of OTF II. Stradley Ronon Stevens & Young LLP is serving as legal counsel to the special committee of independent directors of OTF II.
Kirkland & Ellis LLP is serving as legal counsel to the investment advisors of OTF and OTF II.
About Blue Owl Technology Finance Corp.
Blue Owl Technology Finance Corp. ("OTF") is a specialty finance company focused on originating and making loans to, and making debt and equity investments in, technology-related companies, specifically software, based primarily in
About Blue Owl Technology Finance Corp. II
Blue Owl Technology Finance Corp. II ("OTF II") is a specialty finance company focused on originating and making loans to, and making debt and equity investments in, technology-related companies, specifically software, based primarily in
Forward-Looking Statements
Some of the statements in this press release constitute forward-looking statements because they relate to future events, future performance or financial condition of OTF or OTF II or the two-step merger (collectively, the "Mergers") of OTF II with and into OTF. The forward-looking statements may include statements as to: future operating results of OTF and OTF II and distribution projections; business prospects of OTF and OTF II and the prospects of their portfolio companies; and the impact of the investments that OTF and OTF II expect to make. In addition, words such as "anticipate," "believe," "expect," "seek," "plan," "should," "estimate," "project" and "intend" indicate forward-looking statements, although not all forward-looking statements include these words. The forward-looking statements contained in this press release involve risks and uncertainties. Certain factors could cause actual results and conditions to differ materially from those projected, including the uncertainties associated with (i) the timing or likelihood of the Mergers closing; (ii) the expected synergies and savings associated with the Mergers; (iii) the ability to realize the anticipated benefits of the Mergers, including the expected accretion to net investment income and the elimination or reduction of certain expenses and costs due to the Mergers; (iv) the percentage of OTF and OTF II shareholders voting in favor of the proposals submitted for their approval; (v) the possibility that competing offers or acquisition proposals will be made; (vi) the possibility that any or all of the various conditions to the consummation of the Mergers may not be satisfied or waived; (vii) risks related to diverting management's attention from ongoing business operations; (viii) the risk that shareholder litigation in connection with the Mergers may result in significant costs of defense and liability; (ix) changes in the economy, financial markets and political environment; (x) the impact of geo-political conditions, including revolution, insurgency, terrorism or war, including those arising out of the ongoing war between
Additional Information and Where to Find It
In connection with the Mergers, OTF and OTF II plan to file with the SEC and mail to their respective shareholders a joint proxy statement/prospectus (the "Joint Proxy Statement") and OTF plans to file with the SEC a registration statement on Form N-14 (the "Registration Statement") that will include the Joint Proxy Statement and a prospectus of OTF. The Joint Proxy Statement and Registration Statement will each contain important information about OTF, OTF II, the Mergers and related matters. This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended. SHAREHOLDERS OF OTF AND OTF II ARE URGED TO READ THE JOINT PROXY STATEMENT AND THE REGISTRATION STATEMENT AND OTHER DOCUMENTS THAT ARE FILED OR WILL BE FILED WITH THE SEC AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT OTF, OTF II, THE MERGERS AND RELATED MATTERS. Investors and security holders will be able to obtain the documentation filed with the SEC free of charge at the SEC's website, http://www.sec.gov and for documents filed by OTF and OTF II at https://www.blueowlproducts.com/otf-otf-ii-merger.
Participation in the Solicitation
OTF, its directors, certain of its executive officers and certain employees and officers of Blue Owl Technology Credit Advisors LLC and its affiliates may be deemed to be participants in the solicitation of proxies in connection with the Merger. Information about directors and executive officers of OTF is set forth in its proxy statement for its 2024 Annual Meeting of Shareholders, which was filed with the SEC on March 28, 2024. OTF II, its directors, certain of its executive officers and certain employees and officers of Blue Owl Technology Credit Advisors II LLC and its affiliates may be deemed to be participants in the solicitation of proxies in connection with the Merger. Information about directors and executive officers of OTF II is set forth in its proxy statement for its 2024 Annual Meeting of Shareholders, which was filed with the SEC on March 28, 2024. Information regarding the persons who may, under the rules of the SEC, be considered participants in the solicitation of the OTF and OTF II shareholders in connection with the Merger will be contained in the Joint Proxy Statement when such document becomes available. These documents may be obtained free of charge from the sources indicated above.
Investor Contact:
BDC Investor Relations
Michael Mosticchio
credit-ir@blueowl.com
Media Contact:
Prosek Partners
Josh
pro-blueowl@prosek.com
1 Based on latest publicly available filings as of November 8, 2024. Combined company assets are as of September 30, 2024 and assumes | |||||||||||||||||||
2 As part of its portfolio monitoring process, Blue Owl Technology Credit Advisors LLC employs an investment rating system to categorize our investments. |
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SOURCE Blue Owl Technology Finance Corp.
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