Barings BDC, Inc. [NYSE: BBDC] and Sierra Income Corporation disclosed that they have inked a merger agreement under which Sierra will merge with and into Barings BDC. The merged firm will remain externally handled by Barings LLC. and is anticipated to have nearly $2.2 billion of investments on a pro forma basis.
Barings BDC contemplates that the enhanced size and scale of the merged firm will create many strategic and financial advantages to shareholders and will position the merged firm to capitalize on positive market conditions.
Furthermore, Sierra’s stockholders will obtain 0.44973 shares of Barings BDC common stock for each share of Sierra common stock, resulting in nearly 46.0 million newly issued Barings BDC shares. It has a total value of nearly $523.7 million, or $5.12 per fully diluted Sierra share, based on Barings BDC’s June 30, 2021, NAV of $11.39 per share.
Additionally, Barings LLC will pay $100 million in cash, or nearly $0.98 per share, directly to Sierra stockholders at closing. After the deal, Barings BDC’s pro forma equity base is likely to be nearly $1.3 billion and Barings BDC stockholders and Sierra stockholders are anticipated to hold nearly 58.7% and 41.3%, respectively, of the merged firm.
Moreover, Barings LLC will enter into a credit support agreement with Barings BDC, for the benefit of the merged company, to safeguard against net cumulative unrealized and realized losses of up to $100.0 million on the purchased Sierra investment portfolio over the next 10 years.