On Tuesday, Goldman Sachs (NYSE:GS) reaffirmed a Buy rating on shares of Blue Owl Capital (NYSE:OWL), with a steady price target of $21.75. The investment firm is set to acquire IPI Partners, an alternative asset manager focusing on digital infrastructure, with assets under management (AUM) valued at $10.5 billion.
The transaction is slated for completion between the fourth quarter of 2024 and the first quarter of 2025 and carries a price tag of approximately $1 billion, excluding potential earn-out considerations.
Blue Owl Capital plans to fund the acquisition with a mix of 80% equity and 20% cash. In conjunction with the acquisition, Blue Owl will also engage in a service agreement with ICONIQ. This arrangement will see ICONIQ providing transitional services such as investment analysis and investor relations to Blue Owl, with payment for these services to be made in OWL equity between 2026 and 2028, in addition to the upfront acquisition cost.
The strategic acquisition of IPI is expected to bolster Blue Owl's presence in the digital infrastructure space, adding to its existing real estate capabilities and diversifying its AUM mix. Notably, only about 30% of IPI's AUM overlaps with Blue Owl's current limited partner (LP) base, which hints at opportunities for further diversification and potential cross-selling in the future.
Analysts project that the IPI acquisition could offer a slight increase in Blue Owl's earnings per share (EPS) by 0.5% to 0.8% for the year 2026, aligning with management's forecast of the deal being neutral to EPS through 2025 and modestly accretive the following year.
The acquisition is part of Blue Owl's broader strategy to partner with burgeoning managers in lucrative market segments and to mitigate risks associated with the increasingly competitive Direct Lending business.
However, it's noteworthy that this marks Blue Owl's fourth acquisition announcement in less than six months, raising concerns over potential execution and valuation risks related to the company's rapid expansion strategy.
In other recent news, Blue Owl Capital has announced a definitive agreement to acquire digital infrastructure fund manager, IPI Partners, for approximately $1 billion. The acquisition, which includes $10.5 billion in assets under management from IPI, is set to close between Q4 2024 and Q1 2025. The transaction is expected to be neutral to Blue Owl's earnings in 2025 and modestly accretive in 2026.
Simultaneously, Blue Owl reported strong Q2 results, with fee-related earnings of $0.21 per share and distributable earnings of $0.19 per share. The company also declared a dividend of $0.18 per share. During the quarter, Blue Owl acquired Atalaya Capital Management, boosting its assets under management to over $220 billion.
In addition to Atalaya, Blue Owl added Prima and Kuvare Asset Management to its portfolio, significantly contributing to its assets under management. The company also amended a key financial agreement to comply with the Trust Indenture Act of 1939, reflecting active management of its financial commitments.
In terms of personnel, Blue Owl recently appointed John Valtwies as the head of its Australian private wealth business, marking further expansion of its global presence.
InvestingPro Insights
Blue Owl Capital's recent acquisition of IPI Partners aligns well with its growth strategy, as reflected in the company's financial metrics and market performance. According to InvestingPro data, Blue Owl has demonstrated strong revenue growth, with a 31.88% increase in quarterly revenue as of Q2 2024. This growth trajectory supports the company's aggressive acquisition strategy.
The company's stock has shown impressive performance, with a 57.68% total return over the past year and a 28.62% return in the last month. This positive momentum is further underscored by the stock trading near its 52-week high, at 97.69% of its peak value.
InvestingPro Tips highlight that Blue Owl has raised its dividend for three consecutive years, with a current dividend yield of 3.47%. This consistent dividend growth, coupled with the company's profitability over the last twelve months, suggests a solid financial foundation to support its expansion plans.
However, investors should note that the stock is trading at a high P/E ratio of 110.37, which may indicate that the market has already priced in significant growth expectations. This valuation metric aligns with the InvestingPro Tip that Blue Owl is trading at a high earnings multiple.
For readers interested in a more comprehensive analysis, InvestingPro offers 11 additional tips for Blue Owl Capital, providing deeper insights into the company's financial health and market position.
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