BLUE OWL CAPITAL INC. current report, 19 May 2021

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Blue Owl Capital Inc. Form 8-K Summary

Business context and reporting period

Filed May 21, 2021, reporting events occurring primarily on May 19, 2021. Altimar Acquisition Corporation completed its domestication from the Cayman Islands to Delaware, changed its name to Blue Owl Capital Inc., and consummated its business combination with Owl Rock Capital Group, Owl Rock Capital Partners, Dyal and related entities. Blue Owl operates through an Up-C structure, with substantially all operating assets held by Blue Owl Holdings LP and Blue Owl Carry LP.

The transaction had aggregate consideration of approximately $12.15 billion, including approximately $5.47 billion for Owl Rock equityholders and $6.68 billion for Dyal equityholders. A $1.5 billion PIPE investment was completed at $10.00 per share. Blue Owl's Class A common stock and warrants began trading on the NYSE under OWL and OWL.WS, respectively.

Financial metrics, capital structure and liquidity

  • The filing includes or incorporates unaudited Owl Rock and Dyal financial statements for the three months ended March 31, 2021 and the year ended December 31, 2020, together with unaudited pro forma combined financial statements. The provided filing text does not state consolidated Blue Owl revenue, net income, cash flow, margins, debt, cash balance, or liquidity metrics.
  • The transaction issued 320,005,258 shares of Class A common stock according to the capital stock disclosure, while another section states 320,005,528 shares immediately after closing. This inconsistency should be reconciled to the final capitalization table.
  • Other reported shares outstanding at closing included 628,380,707 shares of Class C common stock, 294,656,373 shares of Class D common stock and 14,990,864 shares of Class E common stock.
  • Approximately 14.16 million warrants to purchase Class A common stock were outstanding immediately after closing. Altimar warrants became exercisable for Blue Owl Class A common stock on substantially the same terms.
  • Blue Owl authorized a one-year program to repurchase up to $100 million of Class A common stock. The program is discretionary and does not require any repurchases.
  • Blue Owl had not paid cash dividends on its Class A common stock. Future dividends remain subject to Board discretion, earnings, capital requirements and financial condition.

Material changes versus the prior comparable period

  • Altimar ceased being a blank-check shell company and became Blue Owl Capital Inc., the successor issuer to Altimar.
  • The combined company adopted a Delaware corporate structure, new certificate of incorporation and bylaws, an Up-C operating structure, and a multi-class common stock structure.
  • Blue Owl entered into a Tax Receivable Agreement requiring payment of 85% of certain realized or deemed realized tax benefits to specified equityholders and other parties.
  • A new Investor Rights Agreement established nomination rights, governance protections, an Executive Committee, preemptive rights and contractual lock-ups for specified stakeholders.
  • The company adopted a 2021 Omnibus Equity Incentive Plan with a share and operating-unit limit of 101,230,522, subject to plan adjustments.
  • KPMG was appointed as Blue Owl's independent registered public accounting firm. WithumSmith+Brown was dismissed as Altimar's auditor after completing its review of the pre-business-combination SPAC accounts.
  • New directors and executive officers were appointed, including Douglas Ostrover as Chief Executive Officer, Marc Lipschultz and Michael Rees as Co-Presidents, Alan Kirshenbaum as Chief Financial Officer, and Junot Foradada as Chief Accounting Officer.

Guidance, outlook, risks and unusual items

  • The filing provides no quantified financial guidance or specific operating outlook. Forward-looking statements reference projected growth, market opportunity and anticipated performance but are subject to substantial uncertainty.
  • Principal risks include conflicts of interest, competition, retention of key personnel, market and economic conditions, COVID-19 effects, interest-rate changes, market volatility, legal and regulatory changes, and tax consequences.
  • The Tax Receivable Agreement could create significant future cash obligations. Payments are not contingent on recipients retaining ownership and may accelerate upon a change of control, termination or specified breaches.
  • Governance and voting power are concentrated among holders of Class C and Class D common stock and related operating partnership units. The filing reports combined voting power of approximately 50.6% for Douglas Ostrover and approximately 40.6% for Michael Rees, subject to stated assumptions and exclusions.
  • Pending litigation included disputes involving Golub Capital and Sixth Street relating to Dyal and the business combination. Courts and an emergency arbitrator had denied certain requested preliminary or emergency relief as of the filing disclosures, but related proceedings remained a risk.
  • Altimar previously identified a material weakness in internal control over financial reporting arising from the required restatement and reclassification of warrants as liabilities. The weakness had not been remediated as of March 31, 2021.
  • Employment agreements for key individuals provide $500,000 annual base salaries, additional compensation tied to management fee and other revenues, and extended post-termination compensation and restrictive covenants under specified circumstances.

Important facts for investors to verify

  • Reconcile the conflicting Class A share counts of 320,005,258 and 320,005,528 reported in different sections.
  • Review Exhibits 99.2 through 99.6 for actual Owl Rock, Dyal and pro forma revenue, earnings, cash flow, margins, assets, liabilities and liquidity.
  • Assess the potential magnitude and duration of payments under the Tax Receivable Agreement, including change-of-control acceleration provisions.
  • Review the full Investor Rights Agreement, multi-class voting structure, operating partnership exchange terms and lock-up provisions.
  • Confirm the status and potential financial impact of the disclosed Golub, Sixth Street and related legal proceedings.
  • Monitor remediation of the material weakness and the effect of the auditor transition from Withum to KPMG.
  • Evaluate dilution from warrants, operating partnership unit exchanges, seller earnout units and the 2021 Omnibus Plan.