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SIERRA ACQUISITION | 9 Months Ended
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Sep. 30, 2022
Business Combination and Asset Acquisition [Abstract] |
SIERRA ACQUISITION | SIERRA ACQUISITION On February 25, 2022, the Company completed the Sierra Acquisition pursuant to the terms and conditions of that certain Agreement and Plan of Merger (the “Sierra Merger Agreement”), dated as of September 21, 2021, by and among the Company, Mercury Acquisition Sub, Inc., a Maryland corporation and a direct wholly owned subsidiary of the Company (“Sierra Acquisition Sub”), Sierra Income Corporation, a Maryland corporation (“Sierra”), and Barings. To effect the acquisition, Sierra Acquisition Sub merged with and into Sierra, with Sierra surviving the merger as the Company’s wholly owned subsidiary (the “First Sierra Merger”). Immediately thereafter, Sierra merged with and into the Company, with the Company as the surviving company (the “Second Sierra Merger” and, together with the First Sierra Merger, the “Sierra Merger”). The Merger has been treated as a “reorganization” within the meaning of Section 368(a)(1)(A) of the Code. Pursuant to the Sierra Merger Agreement, Sierra stockholders received the right to the following merger consideration in exchange for each share of Sierra common stock issued and outstanding immediately prior to the effective time of the First Sierra Merger (excluding any shares cancelled pursuant to the Sierra Merger Agreement): (i) approximately $0.9783641 per share in cash, without interest, from Barings and (ii) 0.44973 of a validly issued, fully paid and non-assessable share of the Company’s common stock. The Company issued approximately 45,986,926 shares of its common stock to Sierra’s former stockholders in connection with the Sierra Merger, thereby resulting in the Company’s then-existing stockholders owning approximately 58.7% of the combined company and Sierra’s former stockholders owning approximately 41.3% of the combined company. In connection with the completion of the Company’s acquisition of Sierra, the Board affirmed the Company’s commitment to make open-market purchases of shares of its common stock in an aggregate amount of up to $30.0 million at then-current market prices at any time shares trade below 90% of the Company’s then most recently disclosed NAV per share. Any repurchases pursuant to the authorized program will occur during the 12-month period commencing on April 1, 2022 and are expected to be made in accordance with a Rule 10b5-1 purchase plan that qualifies for the safe harbors provided by Rules 10b5-1 and 10b-18 under the Exchange Act, as well as subject to compliance with the Company’s covenant and regulatory requirements. In connection with the Sierra Acquisition, on February 25, 2022, the Company entered into the New Barings BDC Advisory Agreement with the Adviser. Promptly following the closing of the Sierra Merger, the Company also entered into the Sierra Credit Support Agreement with Barings. See “Note 2 - Agreements and Related Party Transactions” for more information regarding the New Barings BDC Advisory Agreement and the Sierra Credit Support Agreement. The Sierra Acquisition was accounted for in accordance with the asset acquisition method of accounting as detailed in ASC 805-50, Business Combinations-Related Issues. Under asset acquisition accounting, acquiring assets in groups not only requires ascertaining the cost of the asset (or net assets), but also allocating that cost to the individual assets (or individual assets and liabilities) that make up the group. Per ASC 805-50-30-1, the acquired assets (as a group) are recognized based on their cost to the acquiring entity, which generally includes transaction costs of the asset acquisition, and no gain or loss is recognized unless the fair value of noncash assets given as consideration differs from the assets carrying amounts on the acquiring entity’s records. ASC 805-50-30-2 goes on to say asset acquisitions in which the consideration given is cash are measured by the amount of cash paid. However, if the consideration given is not in the form of cash (that is, in the form of noncash assets, liabilities incurred, or equity interests issued), measurement is based on the cost to the acquiring entity or the fair value of the assets (or net assets) acquired, whichever is more clearly evident and, thus, more reliably measured. The fair value of the merger consideration paid by the Company was allocated to the assets acquired and liabilities assumed based on their relative fair values as of the date of acquisition and did not give rise to goodwill. Since the fair value of the net assets acquired exceeded the fair value of the merger consideration paid by the Company, the Company recognized a deemed contribution from the Adviser. The following table summarizes the allocation of the purchase price to the assets acquired and liabilities assumed as a result of the Sierra Acquisition:
($ in thousands) |  |
Common stock issued by the Company |  | $ | 499,418 |
Cash consideration paid by the Company(1) |  | 10,670 |
Deemed contribution from Barings LLC |  | 27,729 |
Total purchase price |  | $ | 537,817 |
Assets acquired: |  |
Investments(2) |  | $ | 442,198 |
Cash |  | 102,006 |
Other assets(3) |  | 3,519 |
Total assets acquired |  | $ | 547,723 |
Liabilities assumed(4) |  | (9,906) |
Net assets acquired |  | $ | 537,817 |
(1)The Company incurred $10.6 million in professional fees and other costs related to the Sierra Acquisition, including $4.0 million in investment banking fees. (2)Investments acquired were recorded at fair value, which is also the Company's initial cost basis (3)Other assets acquired in the Sierra Acquisition consisted of the following:
($ in thousands) |  |
Interest and fees receivable |  | $ | 2,874 |
Escrow receivable |  | 645 |
Total |  | $ | 3,519 |
(4)Liabilities assumed in the Sierra Acquisition consisted of the following:
($ in thousands) |  |
Accrued merger expenses |  | $ | 3,327 |
Current and deferred tax liability |  | 3,814 |
Other liabilities |  | 2,765 |
Total |  | $ | 9,906 |

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- Definition The entire disclosure for asset acquisition. + References Reference 1: http://www.xbrl.org/2009/role/commonPracticeRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 50 -Section 15 -Paragraph 3 -URI https://asc.fasb.org/extlink&oid=6911878&loc=d3e8732-128492 + Details
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