FS KKR Capital Completes Merger; Initiates $100M Share Buyback


The merger of FS KKR Capital Corp (FSKR) and FS KKR Capital Corp. II has been completed, and the combined entity will function as FS KKR Capital Corp under the ticker (FSK).

Under the agreement, FSKR investors are getting 0.9498 FSK shares for each FSKR share held. This exchange ratio makes sure that the net asset value of shares held in FSK will be the same as the shares held in FSKR.

FSK Chairman and CEO Michael Forman said, “We are excited to complete this merger and operate a single BDC with the market reach and balance sheet strength to be a leader in private credit markets. This combination represents an important milestone for our franchise in our plan to drive enhanced value to our investors.” (See FS KKR Capital stock chart on TipRanks)

Moreover, the company has announced a share buyback program of $100 million with a one-year duration unless the program gets extended or the entire buyback amount gets exhausted. FSK will acquire shares under this program from the open market at prices lower than the current net asset value per share.

Last month, Raymond James analyst Robert Dodd reiterated a Hold rating on the stock but did not assign any price target.

Dodd told investors, “On an overall combined portfolio basis (the relevant go-forward portfolio), we believe outright stress has fallen – a good trend. However, near-stress assets have risen in contrast to the BDC group. We believe some work remains to be done in the FSK portfolio and that portfolio risk is still somewhat elevated compared to peers.”

Based on 2 Buys, 1 Hold, and 1 Sell, consensus among analysts is a Hold. The FSK average analyst price target of $22.83 implies the stock is fairly priced at current levels. Shares have gained 50.2% over the past year.

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