Blue Owl has decided to cancel its mergers with two private credit funds after the acquisitions caused concern among investors, according to people familiar with the matter.
The company planned to merge its small, non-traded Blue Owl Capital Corporation II (OBDC II) into the larger publicly traded fund Blue Owl Capital Corporation (OBDC). At the time, the company restricted investors in its $1.7 billion OBDC II from redeeming it until the deal was completed, even though the merger would have resulted in a paper loss of approximately 20% based on where the $17.1 billion OBDC was traded.
Shares of parent company Blue Owl Capital fell about 6% on Monday on news of the redemption restrictions. It also raised further concerns among investors about the current state of the private credit industry, particularly in areas that have begun to provide large sums of money to build AI data centers, which many fear is overhyped. Blue Owl stock rebounded slightly on Tuesday.
The boards of both companies did not believe the benefits of combining the funds would outweigh the volatility and negative headlines from the acquisition news, the people said. Therefore, they chose to change course, the official said.
Blue Owl confirmed in a press release late Wednesday morning that the proposed merger had been scrapped due to “current market conditions.”
“Both funds remain strong, with excellent fundamentals, and we are confident that they can deliver uniquely attractive returns as we continue to work with the Board of Directors to evaluate the best future opportunities for OBDC II,” Craig Packer, CEO of both funds, said in a release.
Stock chart iconStock chart icon
blue owl, 1 month
Now that the fund merger is complete, OBDC II will allow investors to redeem in the first quarter, the people said, asking not to be identified discussing private information. The fund has historically granted liquidity on a quarterly basis.
Blue Owl stock was little changed in Wednesday trading.
