Blue Owl's Defense: BDC Fights Discount Tender Offer with Cash Flood

NEW YORK, NY – March 06, 2026 – Blue Owl Capital Corporation II (OBDC II) finds itself at the center of a high-stakes financial battle after confirming it received an unsolicited tender offer from activist investors Cox Capital Partners and Saba Capital Management, L.P. The offer seeks to acquire up to 8,000,000 shares, less than 7% of the company, at a price Blue Owl states is a staggering 30% below its net asset value (NAV).

In a swift and powerful countermove, the specialty finance company is highlighting its own aggressive plan to return capital to investors, effectively challenging the activists' premise and forcing its shareholders into a critical decision: accept a deeply discounted, immediate cash-out or trust management's promise of superior value through a series of planned distributions.

OBDC II's board is currently reviewing the offer and has formally advised shareholders to take no action, promising to deliver a formal recommendation in due course. The unfolding situation places a spotlight on the governance of non-traded Business Development Companies (BDCs) and the tactics used by activists seeking to profit from market inefficiencies.

The Shareholder's Dilemma: A Discount Today or NAV Tomorrow?

At the heart of the conflict is a clear choice for OBDC II's investors. The offer from Cox and Saba provides a path to immediate liquidity, a tempting proposition for shareholders in a non-traded fund who may have limited options to sell their shares. However, this liquidity comes at a steep price. The offer of $3.80 per share represents a significant haircut compared to the company's underlying value.

Blue Owl is forcefully arguing that patience will be far more rewarding. The company has put forth a robust capital return plan that it claims will deliver significantly more value than the activist bid. The cornerstone of this plan is a massive special cash distribution equivalent to 30% of the company's NAV, amounting to $2.50 per share. This distribution, funded by a recent $600 million loan asset sale, is scheduled to be paid by March 31, 2026, to all shareholders of record as of March 24.

This single payment alone complicates the activists' arithmetic. Crucially, Blue Owl's board has emphasized that any shareholder who tenders their shares to Cox and Saba would forfeit their right to this substantial distribution and future returns. Beyond the special payout, OBDC II has also committed to replacing its previous quarterly tender offer program with a new strategy of prioritizing additional return of capital distributions of 5% or more on a quarterly basis, on top of its regular monthly dividends.

This presents a stark contrast. The activists offer a lowball price for a quick exit. The company offers a series of payouts at or near NAV, arguing it's a more equitable way to provide liquidity to all shareholders, not just those willing to sell at a loss. For investors, the decision weighs the certainty of the discounted offer against the credibility of management's plan to unlock the fund's full value over the coming year.

The Activist Playbook Hits the BDC Space

The move by Cox and Saba is a classic maneuver from the activist investor playbook, applied here to the unique structure of a BDC. Saba Capital Management, founded by Boaz Weinstein, is particularly well-known for its campaigns targeting closed-end funds and other investment vehicles that trade at a persistent discount to their NAV. Their strategy often involves acquiring a stake and then agitating for changes—such as share buybacks, tender offers at NAV, or even liquidation—to close that valuation gap and turn a profit.

Non-traded BDCs like OBDC II have become fertile ground for this strategy. These vehicles often hold illiquid private debt, and their non-traded nature means shareholders lack a ready public market to sell their shares, creating potential liquidity traps. This dynamic has been exacerbated by an industry-wide increase in redemption requests, which has led many BDCs to limit or "gate" withdrawals, further frustrating investors seeking an exit.

Cox and Saba frame their offer as a liquidity solution for these very investors. They are effectively arbitraging the gap between the fund's stated NAV and the price at which a trapped shareholder is willing to sell. By offering to buy a minority stake at a deep discount, they can acquire assets for significantly less than their reported worth. If they are successful, they can then either wait for the fund to eventually return capital at NAV or use their position to push for actions that accelerate that value realization. While they present their offer as a service, the primary beneficiary is the activist, who profits directly from the discount accepted by selling shareholders.

A Defense Built on Distributions

OBDC II's response to the tender offer is more than just a defensive message; it is an offensive financial maneuver designed to neutralize the activists' primary argument. By engineering a plan to return 50% or more of the company's net assets to shareholders within the year, management is directly addressing the liquidity concerns that make the discounted tender offer appealing in the first place.

The company is leveraging its strong financial position to execute this strategy. The sale of a $600 million slice of its loan portfolio to institutional investors at 99.7% of par value not only funds the massive special distribution but also serves as a powerful market validation of the company's asset valuations. This move implicitly argues that if institutional buyers are willing to pay nearly full value for the assets, retail shareholders should not accept a 30% discount.

This proactive capital return strategy effectively turns the company into its own, more favorable version of a tender offer. Instead of a limited, discounted offer from a third party, OBDC II is providing a large-scale, pro-rata distribution at NAV to all of its shareholders. This strategy, which replaces the company's prior, smaller quarterly redemption programs, is a direct and potent defense. It aims to make the Cox and Saba offer irrelevant by providing a superior liquidity alternative.

However, this aggressive posture is not without consequence. Selling off a significant portion of the portfolio—roughly a third in this case—will change the composition and future earnings potential of the fund. While the company states it will continue to have a well-diversified portfolio and a strong liquidity position, investors will need to assess whether this short-term cash windfall is preferable to the fund's original long-term investment strategy, which has delivered 9.1% annualized returns since inception. The move also sets a precedent for how BDCs might shield themselves from activists in the future, potentially leading to more BDCs using large-scale asset sales and distributions as a defensive tool. This situation is further complicated by the fact that Blue Owl Capital Corporation (OBDC) and OBDC II had previously announced a merger agreement in late 2025, a long-term strategic plan that now intersects with the short-term tactical battle against the activists,activist investors.