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Carlyle Secured Lending (CGBD) Enters Merger Deal With CSL III
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Carlyle Secured Lending, Inc. (CGBD - Free Report) announced a definitive agreement to acquire Carlyle Secured Lending III (CSL III) — a private business development company with a similar investment strategy and portfolio. After the closure of this stock-for-stock merger, CGBD's total assets will increase to $2.5 billion and net assets to more than $1.2 billion upon closing.
CSL III’s investment activities are managed by its investment adviser, CSL III Advisor, an affiliate of Carlyle Group (CG - Free Report) .
Given the substantial overlap in strategy and portfolio composition, merging CGBD and CSL III into a single, larger and more liquid company will generate significant stockholders’ value and improve the investor experience.
Senior managements of CGBD and CSL III, expressed confidence in this merger transaction's potential to accelerate greater trading volume, expand shareholder base and lower operating and financing expenses.
To increase the transaction's value, Carlyle Investment Management L.L.C. (CIM) will exchange its CGBD convertible preferred stock for common stock at net asset value (NAV), reducing the dilution risk associated with preferred stock conversion. This is expected to avert a possible fall in CGBD's NAV per share and quarterly net investment income (NII) per share.
According to the terms of the proposed merger, CSL III owners will receive CGBD’s shares based on an exchange ratio decided before the merger closes.
The combined business will continue to trade on the Nasdaq Global Select Market under the symbol CGBD and be externally managed by CGCIM.
Both firms' boards have unanimously authorized the deal, which is subject to stockholder and regulatory approvals and other customary closing conditions. The merger is expected to be completed in first-quarter fiscal 2025.
Strategic Benefits of Merger
CGBD's higher market capitalization following the merger is expected to give more trading liquidity, the possibility of more institutional ownership and a broader investor base than CGBD as a standalone firm. The combined company's increased scale will enable access to diverse debt financing solutions and drive cost savings and operational synergies for long-term efficiencies.
Following the closing, CGBD plans to carry out its strategy of lending to middle-market U.S. companies. These companies are backed by financial sponsors. CGBD expects this strategy to continue. It is opportunistically supplemented with complementary and differentiated lending and investing strategies that offer risk-diversifying portfolio benefits while leveraging the broad capabilities of Carlyle's Global Credit platform. As a result, the company can increase stockholders’ value by utilizing Carlyle's extensive origination skills and in-depth knowledge of credit to pursue the most attractive relative value prospects, given the state of the market.
Conclusion
The merger of Carlyle Secured Lending with CSL III will offer a smooth strategy integration between the two organizations. It will increase productivity, cut expenses, and help in maintaining good credit quality.
The merger is projected to deliver significant value and advantages to investors in the short term and over the long run.
In the past six months, shares of CGBD have gained 15.9% compared with the industry’s 6.1% growth.
Inorganic Expansion Efforts by Other Financial Services Firms
In July 2024, Eastern Bankshares Inc. (EBC - Free Report) announced the completion of its merger with Cambridge Bancorp. The deal, announced in September 2023 with a 100% stock consideration, aligns with EBC’s inorganic growth strategy.
The merged private banking and wealth management divisions will work under the brand and leadership of Cambridge Trust as it has a distinct presence in its peer local markets. Other areas of the merged bank, including Commercial, Business and Consumer Banking, will operate under the Eastern Bank brand name.
The same month, Victory Capital Holdings, Inc. (VCTR - Free Report) signed a definitive agreement with Amundi to enter into mutual distribution agreements and combine the company with Amundi's US business.
Per the distribution agreements, on the one hand, VCTR will supply US-manufactured active asset management products to Amundi for global distribution, while on the other, it will distribute Amundi’s non-US manufactured products within the United States.
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Carlyle Secured Lending (CGBD) Enters Merger Deal With CSL III
Carlyle Secured Lending, Inc. (CGBD - Free Report) announced a definitive agreement to acquire Carlyle Secured Lending III (CSL III) — a private business development company with a similar investment strategy and portfolio. After the closure of this stock-for-stock merger, CGBD's total assets will increase to $2.5 billion and net assets to more than $1.2 billion upon closing.
CSL III’s investment activities are managed by its investment adviser, CSL III Advisor, an affiliate of Carlyle Group (CG - Free Report) .
Given the substantial overlap in strategy and portfolio composition, merging CGBD and CSL III into a single, larger and more liquid company will generate significant stockholders’ value and improve the investor experience.
Senior managements of CGBD and CSL III, expressed confidence in this merger transaction's potential to accelerate greater trading volume, expand shareholder base and lower operating and financing expenses.
To increase the transaction's value, Carlyle Investment Management L.L.C. (CIM) will exchange its CGBD convertible preferred stock for common stock at net asset value (NAV), reducing the dilution risk associated with preferred stock conversion. This is expected to avert a possible fall in CGBD's NAV per share and quarterly net investment income (NII) per share.
According to the terms of the proposed merger, CSL III owners will receive CGBD’s shares based on an exchange ratio decided before the merger closes.
The combined business will continue to trade on the Nasdaq Global Select Market under the symbol CGBD and be externally managed by CGCIM.
Both firms' boards have unanimously authorized the deal, which is subject to stockholder and regulatory approvals and other customary closing conditions. The merger is expected to be completed in first-quarter fiscal 2025.
Strategic Benefits of Merger
CGBD's higher market capitalization following the merger is expected to give more trading liquidity, the possibility of more institutional ownership and a broader investor base than CGBD as a standalone firm. The combined company's increased scale will enable access to diverse debt financing solutions and drive cost savings and operational synergies for long-term efficiencies.
Following the closing, CGBD plans to carry out its strategy of lending to middle-market U.S. companies. These companies are backed by financial sponsors. CGBD expects this strategy to continue. It is opportunistically supplemented with complementary and differentiated lending and investing strategies that offer risk-diversifying portfolio benefits while leveraging the broad capabilities of Carlyle's Global Credit platform. As a result, the company can increase stockholders’ value by utilizing Carlyle's extensive origination skills and in-depth knowledge of credit to pursue the most attractive relative value prospects, given the state of the market.
Conclusion
The merger of Carlyle Secured Lending with CSL III will offer a smooth strategy integration between the two organizations. It will increase productivity, cut expenses, and help in maintaining good credit quality.
The merger is projected to deliver significant value and advantages to investors in the short term and over the long run.
In the past six months, shares of CGBD have gained 15.9% compared with the industry’s 6.1% growth.
Currently, CGBD carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Inorganic Expansion Efforts by Other Financial Services Firms
In July 2024, Eastern Bankshares Inc. (EBC - Free Report) announced the completion of its merger with Cambridge Bancorp. The deal, announced in September 2023 with a 100% stock consideration, aligns with EBC’s inorganic growth strategy.
The merged private banking and wealth management divisions will work under the brand and leadership of Cambridge Trust as it has a distinct presence in its peer local markets. Other areas of the merged bank, including Commercial, Business and Consumer Banking, will operate under the Eastern Bank brand name.
The same month, Victory Capital Holdings, Inc. (VCTR - Free Report) signed a definitive agreement with Amundi to enter into mutual distribution agreements and combine the company with Amundi's US business.
Per the distribution agreements, on the one hand, VCTR will supply US-manufactured active asset management products to Amundi for global distribution, while on the other, it will distribute Amundi’s non-US manufactured products within the United States.