Blue Owl to Merge BDCs in $1.7 Billion Stock-for-Stock Deal

Blue Owl Capital Corporation (NYSE: OBDC) and Blue Owl Capital Corporation II, or OBDC II, have agreed to merge in a stock-for-stock transaction that will combine the two business development companies into a single, publicly traded entity with an $18.9 billion portfolio.

The deal, which was unanimously approved by the boards of directors of both BDCs upon recommendation from their respective independent special committees, is structured as a stock-for-stock exchange and is intended to be treated as a tax-free reorganization under Section 368(a) of the Internal Revenue Code.

“This merger further simplifies Blue Owl’s BDC complex and creates an even stronger OBDC with added scale and cost efficiencies,” said Craig W. Packer, chief executive officer of OBDC. “By leveraging the depth and capabilities of the Blue Owl platform, we believe this transaction will further enhance our portfolio and ability to continue to generate attractive, risk-adjusted returns for our shareholders.”

With the merger, OBDC’s investment portfolio is expected to grow by $1.7 billion of investments at fair value, reaching approximately $18.9 billion across 239 portfolio companies – reinforcing its position as the second-largest publicly traded BDC behind Blue Owl Technology Finance Corp. (NYSE: OTF).

OBDC’s share of senior secured investments and strong credit characteristics are expected to be maintained with 80% senior secured investments, and 1.3% of pro forma investments at fair value on non-accrual.

OBDC and OBDC II employ a similar investment strategy, and their adviser, Blue Owl Credit Advisors LLC, has been allocating substantially the same investments to both funds since OBDC II’s inception. As a result, approximately 98% of the investments in OBDC II overlap with those of OBDC.

This would be just the latest merger for OBDC; previously reported by AltsWire, Blue Owl Capital Corporation, which traded under the ticker symbol “OBDE,” merged into OBDC in January 2025.

The new consolidation will be accomplished through a two-step process. First, a wholly-owned subsidiary of OBDC will merge into OBDC II, with OBDC II surviving as a wholly-owned subsidiary of OBDC. Immediately thereafter, OBDC II will merge into OBDC, with OBDC continuing as the sole surviving company.

At the effective time, every outstanding share of OBDC II common stock will be converted into the right to receive a number of shares of OBDC common stock equal to the exchange ratio. No fractional shares will be issued as a result of the merger. In lieu of issuing fractional shares, OBDC will directly pay an amount in cash equal to the amount calculated as a result of the exchange ratio to each OBDC II stockholder who would otherwise have been entitled to a fraction of a share.

Designed to ensure a fair transfer of value based on the net asset value of both companies shortly before closing, the exchange ratio is determined by a formula based on the BDCs’ NAV per share as of a determination date, factoring in the closing price of OBDC common stock.

• If OBDC’s share price is at or below its NAV per share: The exchange ratio will simply be the quotient of OBDC II’s NAV per share divided by OBDC’s NAV per share. This represents a straight NAV-for-NAV swap.
• If OBDC’s share price is above its NAV per share (trading at a premium): The exchange ratio will be the quotient of OBDC II’s NAV per share divided by the actual closing price of the OBDC common stock. This structure ensures OBDC II shareholders receive stock valued at the market price, not just the lower NAV, when a premium exists.

In an effort to minimize the financial impact of the complex transaction, the adviser has agreed to cap and reimburse certain expenses. While many standard fees will be paid by the party incurring them, the adviser will reimburse both OBDC and OBDC II for 50% of all incurred fees and expenses related to the merger, with the aggregate reimbursement capped at $3 million. The two BDCs will, however, bear equally the cost of filing fees, as well as the initial legal services for all parties.

The merger agreement also contains certain termination rights in favor of OBDC and OBDC II, including if the mergers are not completed, or if the requisite approvals of OBDC II shareholders are not obtained.

The transaction is expected to create a larger, more scaled BDC, offering potential benefits to investors in the form of improved liquidity and lower operating costs. In terms of immediate cost synergies, the proposed merger is expected to generate approximately $5 million in operational cost savings in the first year.

Completion of the proposed merger is expected to close in the first quarter of 2026 but is subject to OBDC II shareholder approvals, regulatory approvals, and other customary closing conditions.

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