Golub Capital BDC, Inc. (“GBDC,” or the “Company”), a business
development company (Nasdaq: GBDC), announced today that it entered
into a definitive merger agreement with Golub Capital BDC 3, Inc.
(“GBDC 3”), with GBDC as the surviving company, subject to certain
stockholder approvals and customary closing conditions. Following
the merger, GBDC is expected to have $8.5 billion of total assets
at fair value and investments in over 340 portfolio companies, on a
pro forma basis as of September 30, 2023. The Boards of Directors
of both GBDC and GBDC 3 have approved the transaction with the
participation throughout by, and the unanimous support of, their
respective independent directors.
Under the terms of the proposed merger, stockholders of GBDC 3
will receive newly issued shares of GBDC based on a ratio
determined shortly before merger close (the “Exchange Ratio”). GBDC
3 stockholders will receive GBDC shares based on a ratio that is
the greater of: (a) a NAV-for-NAV exchange of shares with GBDC; or
(b) if GBDC shares are trading at a premium to NAV at the closing
of the merger, a number of shares of GBDC equal in value to GBDC
3’s NAV per share, plus a premium of up to 50% of any premium to
NAV in the trading price of GBDC shares at merger close, with a
maximum premium equal to 3% of GBDC 3’s NAV per share. The process
for determining the Exchange Ratio is described more fully in the
section below under the title “Exchange Ratio.”
GBDC believes the proposed merger with GBDC 3 is compelling for
GBDC stockholders for several reasons:
- Increased scale and liquidity. The
proposed merger will increase GBDC’s scale meaningfully, with its
investment portfolio at fair value expected to increase from
approximately $5.5 billion to approximately $8.1 billion, on a pro
forma basis as of September 30, 2023. The increased market
capitalization of GBDC following the merger is anticipated to
provide greater trading liquidity and the potential for greater
institutional ownership than GBDC as a stand-alone company. The
transaction also is expected to deliver operational synergies by
eliminating redundant expenses.
- Consistent investment strategy.
The combined portfolio is expected to be substantially similar to
GBDC’s current portfolio, as over 99% of GBDC 3’s investments
overlap with those of GBDC.1 Post-closing, GBDC expects to continue
the same investment strategy it has followed since its IPO in 2010:
focusing on first lien senior secured and one-stop loans to U.S.
middle market companies in resilient industries that are often
owned by private equity firms. Credit quality is expected to remain
strong and to improve on a pro forma basis as of September 30,
2023: 1) non-accruals as a percentage of GBDC’s total debt
investments at fair value are expected to decrease to 0.9% from
1.2%; and, 2) the combined company would expect to see modest
improvement in internal performance ratings.
- Improved fee structure. In support
of the proposed merger, GBDC’s investment adviser, GC Advisors LLC
(“GC Advisors”), has agreed to reduce the income incentive fee and
capital gain incentive fee rate from 20.0% to 15.0%. The reduction
in incentive fee will become permanent upon merger close and will
be effective as of January 1, 2024 as GC Advisors has agreed to
unilaterally waive incentive fees above 15.0% for periods during
the pendency of the merger. GBDC’s cumulative incentive fee cap,
since-inception lookback period and income incentive fee hurdle
rate of 8% per annum will all remain in place.
- Expected wider access to long-term,
low-cost, flexible debt capital. The combined company is
expected to be able to access a wider array of debt funding
solutions than GBDC as a stand-alone company, and potentially to
receive more attractive terms as a result of the combined company’s
increased scale, including potentially in the investment grade
unsecured debt market.
The transaction is expected to be immediately accretive to
GBDC’s net investment income per share. This accretion is expected
to be driven by the combined company’s lower incentive fees and
lower combined operating expenses.
The combined company will have incremental investment capacity
as financial leverage at closing on a pro forma basis as of
September 30, 2023 is expected to decrease from GBDC’s stand-alone
GAAP leverage of 1.24x to approximately 1.10x.
Additionally, the exchange ratio structure offers the potential
for further accretion to GBDC’s NAV per share if GBDC is trading at
a premium to NAV when the merger closes (see section below under
the title “Exchange Ratio”).
Based on the earnings power of the Company and the new incentive
fee rate, on January 16, 2024, GBDC’s board of directors increased
GBDC’s quarterly base distribution by over 5% and declared a
quarterly distribution of $0.39 per share, which is payable on
March 29, 2024, to stockholders of record as of March 1, 2024.
GBDC’s Board expects to continue to evaluate the potential for
supplemental distributions under its quarterly variable
supplemental distribution framework, which was introduced in fiscal
year 2023.
GBDC’s Board has also announced its intention to declare
additional special distributions totaling $0.15 per share, to be
distributed in three consecutive quarterly payments of $0.05 per
share per quarter, with the record date of the first special
distribution expected to occur shortly after the closing of the
proposed merger.2
David B. Golub, CEO of GBDC, said, “We believe the proposed
merger with GBDC 3 is a win-win-win—good for GBDC stockholders,
good for GBDC 3 stockholders and good for GBDC. We’re pleased to
announce the proposed reduction of GBDC’s incentive fee rate to
15.0% in connection with the proposed merger, another milestone in
GBDC’s history of raising the bar for shareholder alignment. GBDC’s
pro forma fee structure positions it to provide market-leading
returns across different economic and interest rate environments
while keeping its investment strategy focused at the top of the
capital structure (first lien, first out senior secured sponsor
backed floating rate loan investment strategy). We believe this
will be a unique differentiator especially in the context of GBDC’s
meaningfully increased scale post-merger.”
The combined company will remain externally managed by GC
Advisors and all current GBDC officers and directors will remain in
their current roles. The combined company will continue to trade
under the ticker GBDC on the Nasdaq Global Select Market.
Consummation of the proposed merger is subject to GBDC and GBDC
3 stockholder approvals, customary regulatory approvals and other
closing conditions. Assuming satisfaction of these conditions, the
transaction is expected to close in the second calendar quarter of
2024.
Prior to the anticipated closing of the proposed merger, each of
GDBC and GBDC 3 currently intends to maintain its usual practice of
declaring and paying distributions and, to the extent necessary,
will declare and pay any special distributions required to
distribute sufficient taxable income to continue to comply with its
regulated investment company status.
Exchange Ratio
Under the terms of the proposed merger, stockholders of GBDC 3
will receive newly issued shares of GBDC for each share of GBDC 3
based on the Exchange Ratio determined shortly before merger close.
The Exchange Ratio will be calculated based upon (i) the NAV per
share of GBDC and GBDC 3 (“GBDC NAV Per Share” and “GBDC 3 NAV Per
Share”)3, each determined shortly before merger close, and (ii) the
market price of GBDC common stock (“GBDC Price”)4 shortly before
merger close. Formulaically, the Exchange Ratio will be determined
as follows:
- If GBDC Price is greater than GBDC’s NAV Per Share: Exchange
Ratio = (GBDC 3 NAV Per Share x (1 + 50% x (GBDC Price / GBDC NAV
Per Share -1)) / GBDC Price Note: 50% x (GBDC Price / GBDC NAV Per
Share – 1) shall not exceed 3.0%.
- If GBDC Price is less than or equal to GBDC’s NAV Per Share:
Exchange Ratio = GBDC 3 NAV Per Share / GBDC NAV Per Share
The Exchange Ratio is subject to adjustment only in the event of
a reclassification, recapitalization or similar transaction by
either company.
GBDC will hold a conference call to discuss the proposed merger
at 11:30 a.m. (Eastern Time) on Wednesday, January 17, 2024.
All interested parties may participate in the conference call by
dialing (888) 330-3529 approximately 10-15 minutes prior to the
call; international callers should dial +1 (646) 960-0656.
Participants should reference Golub Capital BDC, Inc. when
prompted. For slide presentations that we intend to refer to on the
conference call, please visit the Investor Resources link on the
homepage of our website (www.golubcapitalbdc.com) and click on the
Overview of Proposed Merger With Golub Capital BDC 3, Inc.
Presentation under Events/Presentations. An archived replay of the
call will be available shortly after the call until 11:59 p.m.
(Eastern Time) on January 31, 2024. To hear the replay, please dial
(800) 770-2030. International dialers, please dial +1 (647)
362-9199. For all replays, please reference program ID number
7089069.
Morgan Stanley & Co. LLC served as financial advisor to the
special committee of the independent directors of GBDC. Keefe,
Bruyette & Woods, A Stifel Company, served as financial advisor
to the special committee of the independent directors of GBDC
3.
- Calculated on a fair value basis as of September 30, 2023.
- Stockholder record dates and payment dates expected to be
declared by the Board of Directors at a later time.
- Net asset value of GBDC divided by the number of shares of GBDC
common stock issued and outstanding, both as of the “Determination
Date,” which is a date no earlier than 48 hours (excluding Sundays
and holidays) prior to effectiveness of the merger; and the net
asset value of GBDC 3 divided by the number of shares of GBDC 3
common stock issued and outstanding, both as of the Determination
Date.
- Closing price per share of GBDC common stock on the Nasdaq on
either the Determination Date or, if the Nasdaq is closed on the
Determination Date, the most recent trading day prior to the
Determination Date.
About Golub Capital BDC, Inc.
Golub Capital BDC Inc. (“Golub Capital BDC”) is an
externally-managed, non-diversified closed-end management
investment company that has elected to be regulated as a business
development company under the Investment Company Act of 1940. Golub
Capital BDC invests primarily in one stop and other senior secured
loans of U.S. middle-market companies that are often sponsored by
private equity investors. Golub Capital BDC’s investment activities
are managed by its investment adviser, GC Advisors LLC, an
affiliate of the Golub Capital group of companies (“Golub
Capital”).
About Golub Capital BDC 3, Inc.
Golub Capital BDC 3, Inc. (“GBDC 3”) is an externally-managed,
non-diversified closed-end management investment company that has
elected to be regulated as a business development company under the
Investment Company Act of 1940. GBDC 3 invests primarily in one
stop and other senior secured loans of U.S. middle-market companies
that are often sponsored by private equity investors. GBDC 3’s
investment activities are managed by its investment adviser, GC
Advisors LLC, an affiliate of Golub Capital.
About Golub Capital
Golub Capital is a market-leading, award-winning direct lender
and experienced credit asset manager. We specialize in delivering
reliable, creative and compelling financing solutions to companies
backed by private equity sponsors. Our sponsor finance expertise
also forms the foundation of our Broadly Syndicated Loan and Credit
Opportunities investment programs. We nurture long-term, win-win
partnerships that inspire repeat business from private equity
sponsors and investors.
As of January 1, 2024, Golub Capital had over 875 employees and
over $65 billion of capital under management, a gross measure of
invested capital including leverage. The firm has lending offices
in New York, Chicago, Miami, San Francisco and London. For more
information, please visit golubcapital.com.
Forward-Looking Statements
This communication may contain “forward-looking statements”
within the meaning of the Private Securities Litigation Reform Act
of 1995. Statements other than statements of historical facts
included in this communication may constitute forward-looking
statements and are not guarantees of future performance or results
and involve a number of risks and uncertainties. Actual results may
differ materially from those expressed or implied in the
forward-looking statements as a result of a number of factors,
including those described from time to time in filings with the
Securities and Exchange Commission. GBDC undertakes no duty to
update any forward-looking statement made herein. All
forward-looking statements speak only as of the date of this
communication.
Some of the statements in this communication constitute
forward-looking statements because they relate to future events,
future performance or financial condition or the two-step merger of
GBDC 3 with and into GBDC (collectively, the “Mergers” ), along
with the related proposals for which stockholder approval will be
sought (collectively, the “Proposals” ). The forward-looking
statements may include statements as to: future operating results
of GBDC and GBDC 3 and distribution projections; business prospects
of GBDC and GBDC 3 and the prospects of their portfolio companies;
and the impact of the investments that GBDC and GBDC 3 expect to
make. In addition, words such as “may,” “might,” “will,” “intend,”
“should,” “could,” “can,” “would,” “expect,” “believe,” “estimate,”
“anticipate,” “predict,” “potential,” “plan” or similar words
indicate forward-looking statements, although not all
forward-looking statements include these words. The forward-looking
statements contained in this communication 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 elimination of
certain expenses and costs due to the Mergers; (iv) the percentage
of GBDC and GBDC 3 stockholders 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 stockholder 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, including the impacts of inflation and rising interest
rates; (x) risks associated with possible disruption in the
operations of GBDC and GBDC 3 or the economy generally due to
terrorism, war or other geopolitical conflict (including the
current conflict between Russia and Ukraine), natural disasters or
global health pandemics, such as the COVID-19 pandemic; (xi) future
changes in laws or regulations (including the interpretation of
these laws and regulations by regulatory authorities); (xii)
changes in political, economic or industry conditions, the interest
rate environment or conditions affecting the financial and capital
markets that could result in changes to the value of GBDC’s or GBDC
3’s assets; (xiii) elevating levels of inflation, and its impact on
GBDC and GBDC 3, on their portfolio companies and on the industries
in which they invest; (xiv) combined company’s plans, expectations,
objectives and intentions, as a result of the Mergers; (xv) the
future operating results and net investment income projections of
GBDC, GBDC 3, or, following the closing of one or both of the
Mergers, the combined company; (xvi) the ability of GC Advisors to
locate suitable investments for the combined company and to monitor
and administer its investments; (xvii) the ability of GC Advisors
or its affiliates to attract and retain highly talented
professionals; (xviii) the business prospects of GBDC, GBDC 3 or,
following the closing of one or both of the Mergers, the combined
company and the prospects of their portfolio companies; (xix) the
impact of the investments that GBDC, GBDC 3 or, following the
closing of one or both of the Mergers, the combined company expect
to make; (xx) the expected financings and investments and
additional leverage that GBDC, GBDC 3 or, following the closing of
one or both of the Mergers, the combined company may seek to incur
in the future; and (xxi) other considerations that may be disclosed
from time to time in GBDC’s and GBDC 3’s publicly disseminated
documents and filings. GBDC and GBDC 3 have based the
forward-looking statements included in this press release on
information available to them on the date of this communication,
and they assume no obligation to update any such forward-looking
statements. Although GBDC and GBDC 3 undertake no obligation to
revise or update any forward-looking statements, whether as a
result of new information, future events or otherwise, you are
advised to consult any additional disclosures that they may make
directly to you or through reports that GBDC and GBDC 3 in the
future may file with the SEC, including the Joint Proxy Statement
(each as defined below), annual reports on Form 10-K, quarterly
reports on Form 10-Q and current reports on Form 8-K.
Additional Information and Where to Find It
This communication relates to a proposed business combination
involving GBDC and GBDC 3, along with the related Proposals for
which stockholder approval will be sought. In connection with the
Proposals, each of GBDC and GBDC 3 intend to file relevant
materials with the SEC, including a registration statement on Form
N-14, which will include a joint proxy statement of GBDC and GBDC 3
and a prospectus of GBDC (the “Joint Proxy Statement”). This
communication 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. STOCKHOLDERS OF EACH OF GBDC AND GBDC 3 ARE
URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING
THE JOINT PROXY STATEMENT OF GBDC AND GBDC 3 REGARDING THE
PROPOSALS WHEN IT BECOMES AVAILABLE, AS WELL AS ANY AMENDMENTS OR
SUPPLEMENTS THERETO, BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT GBDC, GBDC 3, THE MERGERS AND THE PROPOSALS.
Investors and security holders will be able to obtain the documents
filed with the SEC free of charge at the SEC’s web site,
http://www.sec.gov or, for documents filed by GBDC, from GBDC’s
website at http://www.golubcapitalbdc.com.
Participants in the Solicitation
GBDC and GBDC 3 and their respective directors, executive
officers and certain other members of management and employees of
GC Advisors and its affiliates, may be deemed to be participants in
the solicitation of proxies from the stockholders of GBDC and GBDC
3 in connection with the Proposals. Information regarding the
persons who may, under the rules of the SEC, be considered
participants in the solicitation of the GBDC and GBDC 3
stockholders in connection with the Proposals will be contained in
the Proxy Statement when such document becomes available. This
document may be obtained free of charge from the sources indicated
above.
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version on businesswire.com: https://www.businesswire.com/news/home/20240117326420/en/
Christopher Ericson 312-212-4036 cericson@golubcapital.com
press@golubcapital.com SOURCE Golub Capital BDC, Inc.
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