Blue Owl Capital to Expand Portfolio through KAM Acquisition
Blue Owl Capital Inc. OWL recently sealed a deal to purchase Kuvare Insurance Services LP, also known as Kuvare Asset Management (KAM), for $750 million. The transaction, set to conclude between the second and third quarters of 2024, promises to bolster the company’s financial standing this year, contingent upon regulatory green lights and other stipulated closure criteria.
News of this acquisition prompted a 4.7% surge in OWL shares, a tangible market display of investor optimism in the deal. KAM specializes in serving the asset management needs of the insurance sector, particularly Kuvare UK Holdings (Kuvare). At the deal’s completion, a significant portion of KAM’s workforce is anticipated to transition to Blue Owl Capital.
The acquisition is set to infuse approximately $20 billion in assets under management (AUM) into Blue Owl Capital, a substantial addition to its standing figure of $165.7 billion in AUM as of the end of 2023.
Delving into the Acquisition Details
The acquisition’s consideration comprises $325 million in cash and $425 million in Blue Owl Capital’s Class A common stock. Additionally, the agreement includes a potential earnout of up to $250 million, dependent on specific performance metrics and revenue objectives. This earnout will be disbursed between 2026 and 2028.
Furthermore, Blue Owl Capital has invested $250 million in preferred equity in Kuvare, signifying a long-term commitment to the latter. This significant investment is expected to fuel Kuvare’s business expansion endeavors.
Notably, the acquisition paves the way for the launch of Blue Owl Insurance Solutions, aimed at providing partnership opportunities to insurance companies with a focus on generating attractive returns within a risk-based framework. This strategic move will supplement the company’s existing institutional and Private Wealth capital-raising pathways, broadening its financial service offerings for its clientele.
Management Expresses Enthusiasm for the Future
Doug Ostrover, Co-CEO of Blue Owl Capital, articulated the advantages of the KAM acquisition, highlighting the broader solutions it allows the company to offer the multi-trillion-dollar insurance market at scale. According to Ostrover, KAM’s expertise in investment-grade credit and real estate strategies will complement Blue Owl’s existing strengths in these sectors, facilitating the introduction of unique products and strategies to market participants.
Ostensibly, the union between OWL and Kuvare has resulted in the formation of investment management agreements (IMAs), empowering Blue Owl Capital to allocate assets worth up to $3 billion across different platforms such as Credit, GP Strategic Capital, and Real Estate investments. This strategic move is expected to fortify Kuvare’s asset allocation management across its insurance portfolio and strategic investments.
Reflecting on this noteworthy development, Marc Lipschultz, Co-CEO of Blue Owl Capital, emphasized the strategic significance of the partnership with Kuvare, underscoring its pivotal role in fortifying Blue Owl’s presence in the insurance sector while enhancing the company’s investment solution offerings.
Uplifting Market Performance and Future Potential
Over the last six months, Blue Owl Capital’s shares have enjoyed a remarkable 51.3% upsurge, surpassing the industry’s growth rate of 33.5% over the same period, a testament to investor confidence in the company’s strategic moves and potential growth trajectory.
