Blue Owl Backs Off: Market Conditions Send the Merger Flying South

Core Insights - Blue Owl Capital Corporation (OBDC) has withdrawn from its planned merger with Blue Owl Capital Corporation II (OBDC II) due to unfavorable market conditions, which made the transaction less attractive [1][8] - The merger aimed to integrate a nontraded fund into OBDC, but a significant selloff in private credit stocks led to concerns about investor disadvantages [2] - Despite canceling the merger, both companies believe that a merger could provide long-term strategic value under better conditions and plan to explore future options [2][8] Company Performance - OBDC II, launched in 2017, has achieved a cumulative net return of nearly 80% and an annualized net return of 9.3% since inception, with a fair value of $1.7 billion across 190 companies as of September 30, 2025 [3] - OBDC's share repurchase program of $200 million remains active, supporting its stock price [4][8] - As of September 30, 2025, OBDC held investments in 238 portfolio companies with a combined fair value of $17.1 billion [4] Financial Results - OBDC reported an adjusted EPS of 36 cents for Q3 2025, missing the Zacks Consensus Estimate by 7.7% and reflecting a 23.4% year-over-year decline due to elevated expenses and lower income from prepayments and debt investments [4] - The Zacks Consensus Estimate for OBDC's earnings indicates declines of 19% and 7.8% for 2025 and 2026, respectively [11] Market Comparison - OBDC's shares have decreased by 20.8% year-to-date, compared to a 9.5% decline in the industry [7] - OBDC trades at a forward price-to-earnings ratio of 8.23X, significantly lower than the industry average, and carries a Value Score of C [10]