SYDNEY, AUSTRALIA: Regal Partners Limited (ASX:RPL) has entered into a share sale deed to acquire 100% of the issued share capital of JRJJ Capital Pty Ltd (the head entity of the business trading as “Merricks Capital”.
Merricks Capital, founded in 2007 by current Executive Chairman and Chief Investment Officer (“CIO”) Adrian Redlich, is a hard asset investment specialist with a 17-year history of delivering growth and consistent returns in private credit and alternative investments in Australia and New Zealand.
As at 30 April 2024, Merricks Capital managed approximately A$2.9 billion in capital across three dedicated funds and a number of co-investment vehicles for a broad range of wholesale wealth advisory firms, institutional client groups and family offices.
The consideration payable for the Transaction is approximately A$235m, comprised of a cash payment of A$40 million, subject to customary net debt, regulatory capital and working capital adjustments, and the issue of 63,934,426 fully paid ordinary shares in Regal Partners at a price of A$3.05 per Regal Share.
The A$235m of consideration for the transaction equates to approximately 6.5x normalised EBITDA in the calendar year to 31 December 2023.
In connection with the transaction, RPL will also issue 10,942,459 unlisted options in RPL (“Regal Options”), in aggregate, 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 exercise of the Regal Options is conditional on the satisfaction of specific net profit before tax (“NPBT”) targets.
Completion of the transaction is conditional on Regal Partners’ shareholders approving the issue of the Regal Shares and the Regal Options at an extraordinary general meeting (“EGM”). The Company intends to hold the EGM in early July 2024, and for the notice of meeting to be released to the ASX in the coming days.
Upon completion of the Transaction, Adrian Redlich will join the Company as Regal Partners’ Chief Investment Officer, Income Strategies and will continue to lead the Merricks business and its team of 44, located in offices across Melbourne and Sydney.
The addition of Merricks Capital to the Regal Partners group will increase Regal Partners’ total group funds under management (“FUM”) by 24% to A$15.1 billion on a pro forma basis as at 30 April 2024.
Regal Partners’ Chief Executive Officer (“CEO”), Brendan O’Connor, said, “Over 17 years, Adrian Redlich and the Merricks Capital team have established themselves as a leading provider of alternative investment solutions, delivering attractive risk-adjusted returns to their investors. The business is well-recognised as being a leader in the provision of innovative financing solutions to the agricultural, commercial real estate and specialised industrial and infrastructure sectors, leveraging the deep experience and capabilities of its 44-person team.
“The addition of Merricks Capital to the Regal Partners platform will significantly expand the origination and underwriting capabilities for both groups, bringing Regal’stotal FUM across credit and royalty solutions alone to over A$6 billion. 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 that 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 Partners expects the Transaction to be accretive to its earnings per share in calendar year 2024, before any synergies.
The cash component of the consideration for the Transaction is expected to be funded by a combination of existing cash sources and investments on Regal Partners’ balance sheet.
Merricks Capital’s Executive Chairman and CIO, Adrian Redlich, said “This is a transformational development for the Merricks Capital business and one that will significantly accelerate the scale and opportunity set available to its investors.
Regal’s extensive corporate relationships, diverse access to deal-flow opportunities and deeply experienced industry specialists will provide Merricks with a strong foundation for continued growth. Merricks Capital will retain its key people, branding and local presence, at the same time benefiting from access to Regal’s well-regarded corporate and operating platforms.
“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. 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. We look forward to working together and delivering on Regal’s broader vision of being the leading provider of alternative investment strategies in Australia and Asia.”
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