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Goldman Sachs BDC, MMLC amends merger to base exchange on NAV

Jun. 11, 2020 7:29 AM ETGoldman Sachs BDC (GSBD)By: Liz Kiesche, SA News Editor2 Comments
  • Due to the market volatility caused by the COVID-19 pandemic, Goldman Sachs BDC (NYSE:GSBD) and Goldman Sachs Middle Market Lending ("MMLC") adjust their merger agreement to "net asset value for net asset value exchange" vs. a fixed share exchange ratio.
  • They made the change because they weren't sure that one of the original merger agreement's closing conditions that hinged on GSBD's stock price could be met.
  • Under the revised agreement, the exchange ratio will be determined at closing so that shares issued by GSBD to MMLC shareholders will result in an ownership split of the combined company based on each of GSBD’s and MMLC’s respective net asset values.
  • Based on March 31, 2020 net asset values and pro forma for the MMLC distributions, transaction costs, and the repayment of MMLC’s revolving credit facility, GSBD would issue ~1.0656 shares for each MMLC share outstanding. The total share consideration to MMLC shareholders would represent a 17% premium to the pro forma MMLC NAV, based on the closing market price of GSBD as of June 10, 2020.
  • The variable cap on Goldman Sachs Asset Management’s incentive fees has been extended for an additional year, through the end of 2021.
  • Upon closing, GSAM agrees to reimburse GSBD and MMLC for all fees and expenses incurred and payable by GSBD or MMLC, subject to a cap of $4M with respect to each of GSBD and MMLC.
  • Before the closing MMLC's board will declare a $75M distribution to MMLC shareholders relating to the pre-closing period; the distribution is equal to ~8.1% of MMLC’s March 31, 2020 NAV.
  • The combination more than doubles the size of GSBD, and is expected to result in benefits of scale, including improved access to diversified funding sources, cost synergies and greater trading liquidity.
  • The deal is expected to close in Q4 2020.

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