Merger mania on Wall Street continues, with the latest shoe dropping in the financial sector. Ares Management LP and Kayne Anderson Capital Advisors LP announced on Thursday that they are merging to create Ares Kayne Management LP, a diversified alternative investment firm with $113 billion in assets.
The deal calls for Ares to pay $2.55 billion to Kayne Anderson’s owners, between $500 million to $750 million in cash and 94.7 million to 107.9 million partnership stock units, based on a regulatory filing. Tony Ressler, Ares’s CEO, noted in a conference call Friday that employees of Ares will own about half of the new company and Kayne Anderson employees approximately 30%.
These Are John Buckingham’s Stock Picks For 2021
The economy remains in distress, although there are signs of recovery underway. John Buckingham of Kovitz, editor of The Prudent Speculator newsletter, has found that value stocks typically outperform coming out of economic downturns. Thus, he argues that this is an excellent time to be a value investor. Q4 2020 hedge fund letters, conferences and Read More
Ares statement pointed out that the merger will lead to a large increase in its fee-related earnings, “which we expect will make this merger meaningfully accretive to Ares’ unit holders.”
The two firms are located less than a block apart in downtown Los Angeles, and the principals have known each other for some time. The deal should be finalized by the end of the year.
New Ares Kayne Management can compete with Blackstone, KKR and Carlyle
The merged firm combines Ares’s strong credit, private equity and real estate lines with Kayne Anderson’s networks and investments in property and energy. Most importantly, the new, bigger firm can now compete in a larger client universe than either one could before the deal.
“Large institutions are reducing the number of relationships and are trying to focus their manager selection,” Ressler, who will become CEO of Ares Kayne, commented in an interview. “We will have a better basket of products to serve our clients for the foreseeable future.”
Among the 2,700 total limited partners who have invested with Ares and Kayne Anderson, only 30 have money in both firms, Ressler noted, offering a major opportunity for the new firm to market its offerings
Of note, Ric Kayne will be co-chairman of the company with Ressler, according to a statement Thursday, and Ares President Mike Arougheti will take over as president of the new firm. Bob Sinnott, Kayne Anderson’s CEO, will become chairman of energy.
The statement noted that nearly all of Kayne Anderson’s dealmakers ex-energy will join the corresponding groups at Ares.
“This combination presents a more holistic view of alternatives — a broader, more diversified array,” Kayne explained. “We found that Ares had a very complementary set of strategies, and they had developed significant competitive advantages.”
Ressler is just 54, and he and 70+ year old Kayne became friends over at least “150 conversations” before discussing a possible combination of their businesses, Ressler commented in the Friday interview.