Blue Owl Calls Off Ill-Starred Fund Merger

Work stations at the Blue Owl office in the Midtown East neighborhood of New York City, (Jose A. Alvarado Jr/Bloomberg)

Key Points

• Blue Owl Capital canceled its plan to merge two private credit funds, Blue Owl Capital Corp. and Blue Owl Capital Corp. II.
• The cancellation followed concerns that the merger would disadvantage holders of one of the nontraded fund due to a 21% discount in the public fund’s net asset value.
• Shares of the publicly traded fund, OBDC, rose 2% to $11.98, while the management firm’s stock fell 0.9% to $13.78.

Blue Owl Capital said Wednesday it will cancel a plan to merge two of its private credit funds. The fund manager’s stock had slumped early this week, when a news report showed how the merger might hurt holders of one fund.

Under the proposal, the firm’s big listed credit fund Blue Owl Capital Corp. would have acquired its smaller, nontraded sibling Blue Owl Capital Corp. II, in a one-for-one exchange. But this year’s industrywide selloff of private credit stocks dropped shares of the public fund—known as OBDC—to a 21% discount of its net asset value. That might have shortchanged holders of the nontraded fund, known as OBDC II.

Blue Owl said the cancellation served the best interests of fund shareholders. Alternative options will be considered. Wednesday’s change of plans seemed to please holders of the publicly traded OBDC fund, whose shares rose 2% to $11.98. But the management firm’s stock fell 0.9%, to $13.78.

“While we continue to believe that combining OBDC and OBDC II could create meaningful long-term value for shareholders, we are no longer pursuing the merger at this point given current market conditions,” said Craig Packer, the chief executive of both OBDC and OBDC II. “Both funds remain strong, with excellent fundamentals, and we are confident in our ability to deliver attractive returns independently as we continue to work with the Board to consider the best future opportunities for OBDC II.”

A Financial Times story on the merger of the funds took 6% off Blue Owl Capital’s stock on Monday.

Write to Bill Alpert at william.alpert@barrons.com