Barings BDC, a US-based business development company, has agreed to acquire MVC Capital, a firm offering investment capital to businesses, for $177.5m.
MVC Capital is a New York-based company that provides long-term debt and equity investment capital to fund growth, acquisitions of businesses across a wide range of industries.
The combined company is expected to have over $1.2bn of investments on a pro forma basis and is expected to be managed externally by Barings.
The deal is subject to approval from shareholders of Barings and MVC along with regulatory and other customary closing conditions.
It is expected to be completed in the fourth quarter of 2020.
The combined company will have increased size and scale
As per Barings BDC, the new company will have increased size and scale, offering several strategic and financial benefits and can position it to capitalise on favourable market conditions.
Apart from gaining improved access to unsecured debt capital markets, the combined company is expected to have increased leverage and investment capacity.
In addition, the merger is expected to result in portfolio diversification through cost synergies and an increase in portfolio obligors.
Upon completion of the transaction, Barings BDC’s equity base is expected to expand by $170m.
Barings BDC stockholders and MVC Capital stockholders are anticipated to hold approximately 74.2% and 25.8%, respectively, of the combined entity.
Barings BDC CEO Eric Lloyd said: “The increasing benefits of alignment, scale, diversification, and investment optionality are likely to drive improved shareholder returns over the long-term and in this period of market dislocation.
“We believe this transaction materially enhances Baring BDC’s platform scale while also providing earnings accretion and portfolio diversification, while continuing our philosophy of strong shareholder alignment.”
