This article is from the Australian Property Journal archive
MERGER and acquisitions activity is ramping up in the private credit space with $12.2 billion specialist alternative investment manager Regal Partners acquiring Adrian Redlich’s commercial real estate lending business Merricks Capital for $235 million.
As at 30 April 2024, Merricks Capital managed approximately $2.9 billion in capital across three dedicated funds and a number of co-investment vehicles, and the acquisition will increase Regal Partners’ total group funds under management by 24% to $15.1 billion.
The transaction reflects equates to approximately 6.5x normalised EBITDA. In calendar year to 31 December 2023, Merricks Capital earned normalised revenue of $59.7 million and normalised EBITDA of $35.9 million.
Regal Partners CEO Brendan O’Connor said the acquisition will further expand Regal’s existing offering within private credit, focused on agriculture, commercial real estate and other industrial and infrastructure, areas which are not specifically serviced within Regal’s current credit capabilities.
“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’s total FUM across credit and royalty solutions alone to over A$6 billion,” he added. “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.”
Redlich said the sale is a transformational development and one that will significantly accelerate the scale and opportunity set available to its investors.
“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,” said Redlich.
The acquisition will include a cash consideration of $40 million and scrip consideration of 63,934,426 Regal Shares issued at a price of A$3.05 per Regal Share on completion of the transaction.
Merricks Capital is 50.5%-owned by Redlich with the remainder 49.5%-owned by private investors including the Liberman and the Abeles families.
Upon completion of the transaction, Redlich will join Regal Partners’ as the Chief Investment Officer, Income Strategies and will continue to lead the Merricks business and its team of 44.
Merricks’ underlying loan book comprises commercial real estate (approximately 70% of the loan book) – providing senior debt funding to the commercial real estate sector in Australia and New Zealand across a range of subsectors including residential, residual stock, mixed use developments, hotels and prime office.
The business also has interests in agriculture (approx. 25% of the loan book) – financing growth across the agriculture supply chain, including property acquisitions for primary producers and infrastructure projects; and specialised industrial and infrastructure (approx. 5% of the loan book) – providing specialised finance solutions to the infrastructure sector across a number of subsectors, including port infrastructure and downstream supply chain assets such as milk processors.
