Ladies and gentlemen, thank you for standing by, and please be advised that today's conference is being recorded. I'd now like to hand the conference over to Quinlan Abel, Assistant Vice President, Investor Relations. Please go ahead.
Thank you, Operator. Good morning, everyone. Joining us on the call today from Runway Growth Finance are David Spreng, Chief Executive Officer, Greg Greifeld, Chief Investment Officer of Runway Growth Capital LLC, our Investment Advisor, and Tom Raterman, Chief Financial Officer and Chief Operating Officer. We also welcome Jody Staggs, President and CEO of SWK Holdings, to the call. During this call, I want to remind you that we may make forward-looking statements based on current expectations. The statements on this call that are not purely historical are forward-looking statements.
These forward-looking statements are not a guarantee of future performance and are subject to uncertainties and other factors that could cause actual results to differ materially from those expressed in the forward-looking statements, including, without limitation, the ability of the parties to consummate the merger of the expected timeline, if at all. The expected synergies and savings associated with the merger. The ability to realize the anticipated benefits of the merger. The impact of the merger on the trading of Runway's shares post-closing. The future operating results and net investment income projections of the combined company. The ability of Runway Growth Capital LLC to implement its future plans with respect to the combined company, market conditions, changing economic conditions, and other factors we identify in our filings with the SEC.
Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions can prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions can be incorrect. You should not place undue reliance on these forward-looking statements. The forward-looking statements contained in this call are made as of the date hereof, and Runway Growth Finance assumes no obligation to update the forward-looking statements or subsequent events. To obtain copies of SEC-related filings, please visit our website. With that, I will turn the call over to David.
Thank you, Quinlan, and thanks, everyone, for joining us as we discuss the exciting announcement that Runway has entered into a definitive merger agreement to acquire SWK Holdings, a specialty finance company with a focus on healthcare and life sciences. SWK provides minimally dilutive financing to small and mid-sized commercial-stage healthcare companies. For those of you tuning in on the webcast, we have prepared some slides to accompany this presentation. Starting with slide three in our investor materials, I will provide a brief overview of the transaction and the significance of adding SWK's investments to our portfolio, and then I will turn it over to Jody Staggs, President and CEO of SWK, to provide additional background on the company.
At a high level, Runway's acquisition of SWK will immediately increase our portfolio by approximately $242 million, based on our view of the estimated fair value of SWK's portfolio as of August 15, 2025, and key personnel to our already best-in-class investment team at our investment advisor. The addition of this portfolio will also serve to increase immediately our exposure to healthcare and life sciences. This milestone advances the objectives we previously articulated, which include optimizing our portfolio through diversification and scale, expanding in attractive industry sectors such as healthcare and life sciences, capitalizing on the benefits of access to the broader BC Partners Credit platform, which was instrumental in sourcing this acquisition opportunity, and increasing NII levels to ensure consistency in our capital allocation strategy. Turning to slide four in the presentation, we've outlined the transaction terms.
As announced in the press release, the transaction will be a NAV-for-NAV merger structured as a tax-free reorganization with an estimated purchase price of approximately $220 million. Consideration includes $75 million in Runway shares valued at closing NAV per share and approximately $145 million in cash. Final purchase price will be calculated 48 hours before closing. The merger agreement for this transaction is included in the Form 8-K we filed with the SEC. The transaction is expected to close at the end of the year or early in the first quarter of 2026, pending shareholder and regulatory approvals and other customary closing conditions. The team will provide additional details shortly, but I'd like to emphasize that this transaction reinforces our commitment to growing and diversifying our asset base in a prudent manner to deliver attractive returns to our shareholders.
With ever-increasing competition across private markets, we are laser-focused on positioning this platform to compete with the best in the business. Now, I will turn the call over to Jody to provide background on SWK.
Thank you, David. It's a pleasure to join the Runway team on the call and speak to the portfolio we built at SWK and how we complement Runway's existing capabilities. Turning to slide five, as David mentioned, SWK is a specialty finance company focused on the healthcare and life science industries. We provide minimally diluted financing to small and mid-sized commercial-stage life science companies. Our team invests in a range of companies and products across the biotechnology, medical device, medical diagnostics and tools, animal health, and pharmaceutical industries. Our experience in this industry is broad in reach, growing, and minimally correlated with economic cycles. Our credit underwriting is anchored by identifying innovative products that have barriers to entry through FDA approval, robust intellectual property, strong clinical data, and physician preference. We believe such products provide tangible collateral to secure appropriate levels of leverage.
Historically, our target financing size has been $5 million to $25 million, and our focus has been on secured first-lien loans and royalty monetizations. As of August 2025, SWK has completed financings with 58 parties, deploying $867 million of capital since inception. Our portfolio has generated mid-teens gross returns on capital with a history of strong credit quality. Through this merger, shareholders will benefit from the robust platform that Runway and BC Partners Credit have built. The combined entity will have increased capacity to issue larger checks to high-quality names and SWK's core competencies while remaining in Runway's target investment range of $20 million to $45 million. The SWK team brings over 20 years of investing experience, and we have constructed this portfolio for attractive risk-adjusted returns.
We look forward to working with the Runway team as we capitalize on attractive financing opportunities in the healthcare and life science industries to the benefit of Runway's shareholders. With that, I'd like to turn the call over to Greg to provide a deeper look at how this merger will benefit our joint portfolio.
Thanks, Jody. Turning to slide six in the presentation, I will discuss the pillars shaping the strategic rationale for the transaction, taking a closer look at the first three pillars before turning the call over to Tom to discuss the final pillar. First, on slide seven, this transaction expands Runway's position and investment capabilities in the healthcare and life sciences sector. As David and Jody touched on, SWK's focus on healthcare and life sciences and specialized team will expand Runway's exposure in this market. For background, our advisor, Runway Growth Capital, has been investing in the sector since 2020, and as of June 30, 2025, healthcare and life sciences made up 14% of our overall portfolio. Through this acquisition, this percentage will increase to approximately 31% of the portfolio.
We continue to believe healthcare and life sciences is a compelling opportunity with high barriers to entry given the time and investment needed for FDA approvals, combined with limited downside risk and excellent risk-adjusted returns. With the addition of SWK, Runway's investment advisor is enhancing our investment team with key personnel who are experts in the sourcing and due diligence in this space. Turning to the second pillar outlined on slide eight, this transaction drives Runway's portfolio scale and diversification through a high-quality complementary portfolio. The transaction will expand Runway's balance sheet to $1.3 billion in total assets on a pro forma basis and add quality names to our portfolio. This moves us towards our previously stated objective of increased diversification and improved risk profile with smaller loan positions. Third, on slide nine, this transaction positions Runway to execute on organic and inorganic growth initiatives.
As part of the BC Partners Credit ecosystem, we have achieved organic growth by enhancing our financing solutions, expanding our origination channels, and augmenting our access to capital. With the acquisition of SWK, we have a repeatable blueprint that is non-dilutive to shareholders for future deals in the venture and growth investment ecosystem. We believe this acquisition demonstrates that Runway is a destination of choice for growth investment and positioned favorably amid industry consolidation, bolstered by the support of BC Partners Credit platform. We do not plan on doing deals for the sake of doing deals. Rather, we will approach it in a thoughtful manner when there is a strong strategic rationale and the math works. Now, I want to turn the call over to Tom and discuss how this transaction enhances our financial profile.
Thank you, Greg. To conclude today's call, I will discuss the final pillar, which is that this transaction enhances our financial profile and grows our shareholder base. Looking at slide 10, as Greg touched on, this transaction introduces Runway as a serious participant in the consolidation of the venture and growth lending markets. As private market competition intensifies, we believe it is important to maintain this position. This deal demonstrates our ability to structure, win, and complete transactions utilizing both cash and equity to drive scale and enhance our market position. Given the strategic benefits we've already outlined today, we see this transaction as a real catalyst for Runway's financial profile. We anticipate enhanced earnings power supported by the following key drivers.
First, by a larger portfolio of $1.3 billion on a June 30 pro forma basis, notably, the acquisition will more than offset the impact of anticipated Q3 repayments we signaled during the last earnings call. Second, an optimized leverage profile of 1.1 that puts us in the middle of our target range. Third, an attractive target portfolio that offers incremental yield relative to Runway's existing portfolio. And fourth, greater expense efficiency as a result of our increased scale. Together, we anticipate this will generate mid-single-digit run rate NII accretion during the first full quarter following the transaction close. It will also support modest ROE expansion and improved dividend coverage. In tandem with enhancing earnings power, we're also lowering our risk profile demonstrated by sector diversification and what we expect to be a smaller average loan size of 2%.
We're also improving our access to debt financing markets, particularly our ability to access ABS and other secured lending markets. Finally, Runway is broadening its shareholder base and trading liquidity of its common shares to the merger terms, which include $75 million in Runway shares to be issued to SWK stockholders. As a result, Oaktree's percentage ownership position as an investor in Runway common stock will be reduced. Oaktree has been an exceptional partner to Runway on our path to public markets and since becoming a public BDC. This transaction will help drive liquidity in our shares, and we hope begin to lift trading levels to reflect the intrinsic value we've demonstrated for almost four years as a publicly listed vehicle. This is an exciting time at Runway as we make significant progress on the objectives we outlined when joining the BC Partners Credit platform.
We thank you all for joining us today and look forward to updating you on our third quarter financial results in November.
This concludes today's conference call. Thank you for your participation. You may now disconnect. Good day.