Omni Bridgeway Ltd (ASX: OBL) Shares Surge 43.5% on $310 Million Deal Announcement

December 18, 2024 03:56 PM AEDT | By Team Kalkine Media

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Omni Bridgeway Ltd (ASX: OBL) Shares Surge 43.5% on $310 Million Deal Announcement — Image source: shutterstock

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Highlights

Omni Bridgeway (ASX:OBL) shares soar 43.5% after announcing a $310 million agreement with Ares Management.

The deal includes the acquisition of a 70% stake in Fund 9 for cash consideration.

OBL’s CEO celebrates transaction, emphasizing strategic goals and leadership in legal finance.

The All Ordinaries Index (ASX:XAO) is seeing a 0.3% uptick today, with one ASX All Ords stock taking the spotlight for its impressive gains. Omni Bridgeway Ltd (ASX:OBL), a company that provides finance for litigation and legal dispute claims, has experienced a remarkable surge in its share price, jumping 43.5%. Shares closed at 96.5 cents on Tuesday, and by Wednesday lunch hour, they were trading at $1.385 per share.

This significant movement in the Omni Bridgeway share price follows the announcement of a strategic deal that is drawing investor interest across the market. The company has entered into a framework agreement with funds managed by Ares Management Corp (NYSE:ARES), a move that is set to boost both Omni Bridgeway's financial standing and its position in the legal finance sector.

$310 Million Deal Stokes Investor Enthusiasm

The key highlight driving the soaring share price is the establishment of a continuation fund through the agreement with Ares Management. The fund will acquire Omni Bridgeway’s co-investment in over 150 investments spanning multiple underlying funds, as well as one remaining balance sheet investment. Collectively, these assets are referred to as Fund 9.

Ares will purchase a 70% interest in Fund 9 for an upfront cash payment of approximately $310 million, while Omni Bridgeway retains the remaining 30% interest. Under the terms of the deal, Ares will receive a preferred return on its 70% stake, while Omni Bridgeway retains further profit rights on the entire portfolio through its 30% share.

This upfront cash payment, along with the transaction structure, has generated considerable excitement among investors. Omni Bridgeway noted that the deal achieves a cash multiple on invested capital (MOIC) of around 3.2 times on capital deployed solely by Omni Bridgeway. This has proven to be a strong selling point for the company, attracting attention in the market.

Management's Strategic Outlook

Omni Bridgeway’s CEO, Raymond van Hulst, expressed his satisfaction with the deal, noting that it aligns with several of the company’s long-term strategic objectives. These goals include:

Validating the fair value of the company’s book and underwriting methodologies
Improving the cost coverage rate
Reducing debt to zero
Strengthening its position as a leading institutional-grade funds management platform for legal assets

Van Hulst further highlighted the company’s 35-year history in legal finance, noting that Omni Bridgeway pioneered the asset class and continues to lead innovation as legal assets become more mainstream in global financial markets.

In a statement, Jan-Paul Kobarg, partner at Ares Management, expressed confidence in the deal, noting the potential for significant growth. He emphasized Ares Management’s role in accelerating Omni Bridgeway’s transition to a capital-light funds management model in a rapidly expanding market where the company is a recognized leader.

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