Golub Capital BDC, Inc. · NASDAQ:GBDC
Golub Capital BDC — Merger or Acquisition (May 2024)
23 slides from Golub Capital BDC's merger presentation, May 2024
Slide 1: Overview of Proposed Merger with Golub Capital BDC 3, Inc.
GOLUB CAPITAL BDC, INC. (“GBDC”) OVERVIEW OF PROPOSED MERGER WITH GOLUB CAPITAL BDC 3, INC. (“GBDC 3”) MAY 2024 CON F IDE N T IA L | © 2024 G OL UB CAP ITAL L L C
Slide 2: Disclaimer
Disclaimer Forward-Looking Statements company and to monitor and administer its investments; (xvii) the ability of GC Advisors or its affiliates to attract and retain highly talented professionals; (xviii) the business prospects of GBDC, This communication may contain “forward-looking statements” wi
Slide 3: Process for Evaluating Potential Merger with GBDC 3
Process for Evaluating Potential Merger with GBDC 3 GBDC’s Board of Directors — along with the independent directors’ financial advisor and legal counsel — has gone through a careful, methodical process to evaluate a potential merger with GBDC 3 and believes that it is: Good for existing stockholder
Slide 4: Summary of Transaction Key Terms
Summary of Transaction Key Terms − Stock-for-stock merger with shares of GBDC 3 common stock to be exchanged for shares of GBDC common stock − The number of shares of GBDC common stock to be received by GBDC 3 stockholders to be determined at merger close based upon (i) the Merger Structure Net Asse
Slide 5: Overview of Proposed Merger Consideration
Overview of Proposed Merger Consideration GBDC to acquire 100% of GBDC 3 in a stock-for-stock merger, with shares to be exchanged based upon an exchange ratio determined at merger close that allows for potential NAV per share accretion at GBDC while valuing GBDC 3 at a potential premium to NAV GBDC
Slide 6: Transaction Rationale
Transaction Rationale ▪ GBDC would be the 5th largest externally managed, publicly traded BDC by assets1 Increased Scale and Liquidity ▪ $8.1 billion investment portfolio across 367 portfolio company investments with an average investment size of <0.30%, top ten investments represent <15% of total i
Slide 7: GBDC 3 Overview
GBDC 3 Overview ▪ Commenced operations October 2, 2017 ▪ Managed by GC Advisors, an affiliate of Golub Capital ▪ $1.4 billion in investor capital subscriptions1, primarily from institutional investors including marquee pension funds, insurance companies, endowments and foundations ▪ Intent from ince
Slide 8: Combination Creates the Fifth Largest Externally Managed, Publicly Traded BDC
Combination of GBDC and GBDC 3 Creates the Fifth Largest Externally Managed, Publicly Traded BDC in the Market GBDC (Pro Forma) will have $8.5 billion in combined total assets, making it the 5th largest externally-managed and publicly traded BDC in the market, and one of the two largest publicly tra
Slide 9: Larger BDCs Generally Have Improved Trading Liquidity
Larger BDCs Generally Have Improved Trading Liquidity Market Capitalization and Average Daily Trading Volume of Largest Externally-Managed and Publicly Traded BDCs ($ in Millions) Market 30-Day Average Daily Capitalization Trading Volume $12,000 $80.0 $70.0 $10,000 $60.0 $8,000 $50.0 $6,000 $40.0 $3
Slide 10: Potential for Continued Improvement in Trading Liquidity
Potential for Continued Improvement in Trading Liquidity GBDC Market Capitalization and Average Daily Trading Volume Pre- and Post-Merger Close ($ in Millions) Market 1-Year Average Daily Capitalization Trading Volume $5,000 $25 $4,500 $3,982 $4,000 $20 $3,500 $3,000 $15 $2,557 Potential for $2,478
Slide 11: Substantial Overlap in Highly Diversified Investment Portfolios
Substantial Overlap in Highly Diversified Investment Portfolios GBDC & GBDC 3 Overlapping Portfolio Company Investments (% of Total Investment Portfolio at Fair Value) GBDC GBDC 3 Non-Overlapping Non-Overlapping 12.0% 0.4% 366 319 Investments1 Investments1 Overlapping 88.0% Overlapping 99.6% Pro For
Slide 12: Pro Forma Portfolio Remains Similar to GBDC Today
Pro Forma Portfolio Remains Similar to GBDC Today Key Portfolio Metrics (% of Total Investment Portfolio at Fair Value) GBDC GBDC 3 Pro Forma GBDC Asset Mix: Equity and Other Senior Investments Secured Senior Secured 8% 8% 8% 5% 8% Junior One Stop 85% 86% 85% Debt 1% 1% 1% 1% 93% Junior Debt1 First
Slide 13: Opportunity for Debt Optimization
Opportunity for Debt Optimization The increased scale of pro forma GBDC may enable better access to wider array of debt funding solutions and potential borrowing cost reductions Debt Funding Considerations ▪ Opportunity to optimize bank lending relationships and drive funding cost savings ▪ $1,288 m
Slide 14: GBDC Continues to Improve on its Best-in-Class Public BDC Fee Structure
GBDC Continues to Improve on its Best-in-Class Public BDC Fee Structure GBDC Investment Advisory Agreement Key Terms GBDC Fee Structure (Waiver effective at merger GBDC Fee Structure announcement, permanent (Current) upon merger close) Change 1.000% 1.000% Base Management Fee No Change (Gross Assets
Slide 15: The Gold Standard in Public BDC Fee Structures
The Gold Standard in Public BDC Fee Structures GREATEST DEGREE OF GOLD STANDARD SHAREHOLDER ALIGNMENT (% of Base (% of Pre- Gross Management Base Management Incentive Income Income Incentive Incentive Fee Cap Assets) Fee Fee Charged on Cash? Fee NII) Incentive Fee Fee Hurdle Rate Measurement Period
Slide 16: Immediate NII Accretion from Fee Structure Amendment
Immediate NII Accretion from Fee Structure Amendment ▪ We believe the incentive fee reduction from 20.0% to 15.0% results in a pro forma increase in adjusted net investment income of between $0.03 - $0.04 per share quarterly, or ~$0.13 per share annually1 ▪ Based on GBDC’s FY 2024 Q2 results, the in
Slide 17: The Bottom Line for BDC Investors: Higher Returns, Lower Portfolio Risk
The Bottom Line for BDC Investors: Higher Returns, Lower Portfolio Risk, and Credit Outperformance Pro forma for the fee structure amendment, GBDC will be amongst the highest returning BDCs in the public BDC sector with a more meaningful 1st lien senior secured focus and better underlying credit per
Slide 18: Merger Consideration Structure Provides for Opportunity for GBDC NAV Accretion
Merger Consideration Structure Provides for Opportunity for GBDC NAV Accretion ▪ Merger consideration structure provides for opportunity for NAV per share accretion at merger close ▪ Assuming that GBDC trades at a level consistent with Wall Street Equity Research Analyst’s current average price targ
Slide 19: Potential for Operational Synergies
Potential for Operational Synergies The merger of GBDC and GBDC 3 offers the potential to create operating synergies due to the elimination of redundant professional services and other corporate expenses Potential Annual Operational Synergies ($ in Millions) Expected decrease of ~$1.2 million per an
Slide 20: Conclusion
Conclusion GBDC’s Board of Directors believes the proposed merger with GBDC 3 creates meaningful value for GBDC stockholders Increased Scale and Liquidity Acquisition of a Like, Diversified Improved Access to Long-Term, Portfolio of Assets Low-Cost, Flexible Debt Capital Immediate Net Investment Inc
Slide 21: Appendix
Appendix O 1 GOLUB CAPITAL
Slide 22: Appendix: Proposed Merger Consideration Structure
Appendix: Proposed Merger Consideration Structure GBDC to acquire 100% of GBDC 3 in a stock-for-stock transaction, with shares to be exchanged based on the following: Merger Consideration Description i. If the ratio of GBDC’s market price to GBDC’s NAV per share is less than or equal to 1.00x then t
Slide 23: Endnotes – Non-GAAP Financial Measures
Endnotes – Non-GAAP Financial Measures 1. On September 16, 2019, the Company completed its acquisition of GCIC. The merger was accounted for under the asset acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) 805-50, Business Combinations — Related Issues. U