Quick Read
- Blue Owl Capital Corporation and Blue Owl Capital Corporation II have terminated their planned merger.
- Market volatility and investor concerns over redemption restrictions drove the decision.
- Both funds remain independently strong, with OBDC II outperforming industry benchmarks since 2017.
- OBDC maintains its $200 million share repurchase program.
- OBDC II plans to reinstate its tender program in Q1 2026.
In a move that’s sending ripples through the private credit landscape, Blue Owl Capital Corporation (NYSE: OBDC) and Blue Owl Capital Corporation II have called off their anticipated merger. The decision, announced on November 19, 2025, comes after a period of marked market volatility and heightened scrutiny from investors—conditions that ultimately pushed Blue Owl’s management and board to reconsider their strategic course.
The merger, initially pitched as a way to unlock long-term value for shareholders, was seen by many in the finance community as a significant consolidation within the middle-market lending sector. Blue Owl Capital Corporation, a specialty finance company with $17.1 billion in investments across 238 portfolio companies, and its younger sibling, Blue Owl Capital Corporation II, with $1.7 billion in 190 companies, both operate under the umbrella of Blue Owl Capital Inc. (NYSE: OWL). Each is regulated as a business development company and managed by Blue Owl Advisors LLC, an SEC-registered investment adviser.
Investor Concerns and Market Selloff Force a Rethink
The merger’s termination did not happen in a vacuum. According to Bloomberg, news of the proposed deal had triggered a selloff in Blue Owl’s shares, fueled by investor anxieties over potential losses and the terms restricting redemptions for private fund investors until the merger closed. This unease was palpable. The prospect of locking up capital during turbulent times proved difficult for many, especially as market conditions deteriorated in late 2025.
Craig W. Packer, CEO of both entities, acknowledged the rationale behind the halt: “While we continue to believe that combining OBDC and OBDC II could create meaningful long-term value for shareholders, we are no longer pursuing the merger at this point given current market conditions.” The sentiment reflects a broader trend in financial management—where adaptability to market realities often trumps ambitious consolidation plans.
Strong Fundamentals Remain—Independent Paths Ahead
Despite the setback, both funds are far from weakened. OBDC II, in particular, stands out for its performance since its 2017 inception: a nearly 80% cumulative net return, 9.3% annualized net return, and loss rates that are minimal (just 23 basis points). Its quarterly tender programs have consistently met redemption requests, and the current non-accrual rate is under 2%—well below industry averages.
OBDC, meanwhile, continues with its $200 million share repurchase program, a move designed to signal confidence and provide liquidity for shareholders. Both companies remain focused on lending to U.S. middle-market businesses, a sector that has weathered its share of storms but continues to offer attractive returns for disciplined investors.
What’s Next for Blue Owl and Its Investors?
The termination of the merger is not the end of the road for Blue Owl’s strategic ambitions. The boards of both OBDC and OBDC II have indicated plans to “reevaluate alternatives in the future”—a message that leaves the door open for new forms of collaboration or restructuring once market stability returns. For now, OBDC II intends to reinstate its tender program in Q1 2026, providing continued liquidity and choice for investors who may have felt uneasy during the merger discussions.
For Blue Owl, the immediate priority is clear: maintain transparency, deliver on investment results, and reassure investors that the fundamentals remain sound. With both funds reporting strong portfolios and management emphasizing their independent strengths, stakeholders are left with a sense of cautious optimism, even as broader market uncertainty lingers.
Lessons from the Aborted Merger
The Blue Owl case is a textbook example of how external market forces can upend even the most carefully constructed financial deals. When volatility strikes, investor confidence and liquidity become paramount—sometimes outweighing potential long-term benefits of consolidation. The episode also underscores the importance of listening to shareholder concerns, especially in an era where private credit funds play an increasingly central role in the U.S. financial system.
As 2025 closes, Blue Owl’s experience serves as a reminder that flexibility and responsiveness are essential traits for any company navigating unpredictable markets. Whether the two funds will revisit merger talks down the line remains to be seen, but for now, their commitment to independent growth and shareholder returns is the story to watch.
Blue Owl’s choice to halt its merger reflects a pragmatic response to market volatility and investor sentiment. While the deal promised long-term synergies, the willingness to pivot demonstrates sound governance and a keen understanding of shareholder priorities in uncertain times.