Regal Partners has announced it has entered into a share sale deed to acquire hard asset investment specialist, Merricks Capital, amid a “highly positive” outlook for private credit in Australia.
In an ASX announcement on Monday, the firm said it would acquire 100 per cent of the issued share capital of JRJJ Capital Pty Ltd, the head entity of the business trading as Merricks Capital, in a transaction worth approximately $235 million.
Merricks Capital manages some $2.9 billion in capital across three funds and numerous co-investment vehicles for a broad range of wholesale wealth advisory firms, family offices, and institutional client groups.
In the calendar year to 31 December 2023, it earned normalised revenue of $59.7 million and normalised EBITDA of $35.9 million.
Regal Partners CEO, Brendan O’Connor, said the Merricks Capital team, led by executive chairman and CIO Adrian Redlich, has established themselves as a leading provider of alternative investment solutions.
“The business is well-recognised as being a leader in the provision of innovative financing solutions to the agriculture, commercial real estate, and specialised industrial and infrastructure sectors, leveraging the deep experience and capabilities of its 44-person team,” O’Connor stated.
The transaction, valued at $235 million, will comprise a cash consideration of $40 million, subject to customary regulatory capital, working capital, and net debt adjustments, and scrip consideration of 63,934,426 Regal shares issued at a price of $3.05 per Regal share on completion of the transaction.
The $235 million of consideration for the transaction equates to approximately 6.5x normalised EBITDA in the calendar year to 31 December 2023.
Additionally, Regal Partners will issue 10,942,458 Regal options to current employees of Merricks Capital in exchange for the cancellation of the options which they hold in Merricks Capital as at the date of completion of the transaction.
The acquisition is subject to Regal Partners shareholder approval, with an EGM slated for early July.
Upon completion, it will increase Regal’s total group funds under management (FUM) by 24 per cent to $15.1 billion on a pro-forma basis as at 30 April 2024.
Additionally, Merricks Capital’s Redlich will join Regal as chief investment officer, income strategies, and will continue to lead the Merricks business across its Melbourne and Sydney offices.
“The addition of Merricks Capital to the Regal Partners platform will significantly expand the origination and underwriting capabilities for both groups, bringing Regal’s total FUM across credit and royalty solutions alone to over $6 billion,” O’Connor elaborated.
“We are thrilled that Adrian and the Merricks team have chosen to partner with Regal for the next phase of their growth, and we believe the combination of Regal and Merricks will be exceptionally well-positioned to benefit from the continued growth in opportunities across private credit in Australia and New Zealand.”
Regal “remains highly positive” on the outlook for private credit in Australia, it elaborated in its announcement, with demand for such solutions “anticipated to accelerate as traditional providers of financing continue to withdraw from the market”.
“Private credit is an asset class where scale, underwriting expertise and consistent access to attractive deployment opportunities are a key contributor to positive returns, with the acquisition of Merricks Capital significantly expanding Regal’s scale and presence in the sector,” it said.
Notably, the acquisition will expand Regal’s existing offering within private credit, which currently exists across mining finance, direct corporate lending and structured credit.
Redlich described the acquisition as a “transformation development” for Merricks Capital, which will significantly accelerate the scale and opportunity set available to its investors given Regal’s corporate relationships, diverse access to deal-flow opportunities, and experienced industry specialists.
“Regal’s consistent focus on performance and alignment with its investors resonates strongly with us and we admire the innovative, founder-led culture that the Regal team have developed over many years,” he said.
“As a group, we are genuinely excited by the vision that Brendan O’Connor and Regal Partners’ board have for the combined business and share the enthusiasm around the opportunities it will deliver for investors, borrowers and shareholders alike.”
