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Regal Partners bets big on private credit surge with $235M Merricks acquisition
Listed alternative asset manager Regal Partners has shored up its private capital offering after announcing via the ASX that it will purchase private credit specialists Merricks Capital for $235 million.
Regal Partners (RPL) will acquire 100 per cent of Merricks for $40 million in cash and the rest in shares, with the $235 million price tag equating to around 6.5x normalised EBITDA in the 2023 calender year.
The move is set to bolster the growing credit and royalties vertical for the $12.2 billion Regal Partners, which will see its funds under management increase $2.9 billion to $15.1 billion once the transaction is completed in July this year (subject to shareholder approval).
Regal has made several expansionary moves in the last year or so, which has seen its FUM increase over $10 billion from just $4.7 billion in mid-2022. In late 2023 it paid $28 million for mining credit specialist Taurus Funds Management’s $2.8 billion worth of FUM. Within a week Regal also announced it was also paying $20 million for $2.7 billion worth of FUM through the acquisition of equities and credit provider PM Capital.
The Merricks acquisition, and to an extent that of Taurus, are strong indicators that private credit funds management is becoming an increasingly favourable arm of the private capital body. Representatives from Regal made this clear in a statement accompanying the announcement.
“Regal remains highly positive on the outlook for private credit in Australia, with demand for credit and credit-like solutions anticipated to accelerate as traditional providers of financing continue to withdraw from the market,” Regal stated. “Private credit is an asset 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.”
Whereas Regal’s current credit capabilities focus on mining finance, direct corporate lending and structured credit, the Merricks acquisition will give the group agricultural, real estate and other industrial credit offerings. That means a more complete offering, and more chance of being considered a one-stop-shop credit provider among businesses seeking capital that don’t wish to take the public exchange route and all the reporting requirements that go with it.
Following completion of the deal, private credit and royalties with represent approximately $6 billion (~40 per cent) of Regal’s FUM.
Private credit, however, is just as vulnerable to market risk as other capital deployment engines such as private equity. Demand from buyout firms in the US has flattened recently, albeit at a high level, forcing some lenders to hold higher-than usual levels of capital, while several credit funds in Canada have had payouts halted amid a liquidity crunch.
Both the Regal team and Merricks founder Adrian Redlich remain confident in the private credit sector, however, with Redlich touting the group’s “extensive corporate relationships, diverse access to deal flow opportunities and deeply experienced industry specialists”.
Redlich will take on the role of chief investment officer, income strategies at Regal Partners.
Regal’s CEO, Brendan O’Connor, praised the work Redlich and his team had done in establishing Merricks as a leading private credit provider. ‘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,” he said.
