ASX-listed alternative investment manager Regal Partners on Monday announced the acquisition of private credit specialist Merricks Capital for a consideration of A$235 million ($156 million).
The transaction includes a cash payment of $40 million and the issue of 63,934,426 fully paid ordinary shares at A$3.05 per Regal share.
With the transaction, Regal Partners’s total group funds under management (FUM) will increase by 24% to A$15.1 billion on a pro forma basis as of 30 April 2024. Merricks Capital’s FUM as of April 30, 2024, is at A$2.9 billion.
Regal Partners expects the transaction to be accretive to its earnings per share in the calendar year 2024, before any synergies.
The cash component of the transaction will be funded by a combination of existing cash resources and investments on Regal Partners’ balance sheet. The transaction equates to approximately 6.5x normalised EBITDA for the calendar year to 31 December 2023.
The deal will allow Regal Partners to expand its scale and capabilities in private credit across Australia and New Zealand.
“The addition of a hard asset investment specialist is highly complementary to Regal Partners’ current client offering, further diversifying existing capabilities across mining finance, corporate lending and structured credit,” the firm said in the announcement.
The deal also presents a strong alignment of interests as approximately 85% of the consideration offered to Merricks Capital shareholders is in RPL shares, the company noted.
Following the transaction, Merricks Capital founder and CIO Adrian Redlich will assume the role of Regal Partners chief investment officer officer (income strategies). Under his leadership, Merricks Capital executed over A$6 billion worth of private credit transactions.
In the calendar year to 31 December 2023, Merricks Capital earned normalised revenue of A$59.7 million and normalised EBITDA of A$35.9m.
Adrian Redlich’s (or entities controlled by him or affiliated with him) stake in the company before the completion of the transaction stands at 50.5% while private investors hold 49.5%. The ownership will be structured through these entities: Merricks Capital Enterprises Pty Ltd, JRJJ Management Pty Ltd, JINT1 Pty Ltd, and Instanz Australia Pty Ltd.
Regal Partners is expected to issue 10,942,459 unlisted options in RPL (Regal Options) to current employees of Merricks Capital. The exercise of the Regal Options is conditional on the satisfaction of specific net profit before tax (NPBT) targets, the statement added.
The closing of the transaction is subject to RPL shareholders’ approval of the issuance of the Regal shares and Regal options at an extraordinary general meeting (EGM). The EGM is expected to be held in early July 2024.