Ares Management and Kayne Anderson Capital Advisors are to merge to form Ares Kayne Management, a diversified alternative asset manager with a combined USD113 billion of assets under management as of 31 March, 2015.
Under the terms of the agreement, Ares will provide USD2.55 billion in consideration, the majority of which will be in the form of Ares Operating Group Units. The transaction is expected to close on or around January 1, 2016, subject to customary regulatory approvals, Kayne Anderson investor consents and other closing conditions.
Ares Kayne combines Ares Management, a leading global alternative asset manager with USD87 billion in assets under management, with Kayne Anderson, a leading US energy and energy infrastructure investor with USD26 billion in assets under management, to form a uniquely diversified global asset manager that will invest across five complementary, market leading investment groups: Tradable Credit, Direct Lending, Energy, Private Equity and Real Estate. The combined firm will have approximately 450 investment professionals in over 20 global offices serving more than 2,700 direct investors, and will be a leading manager of publicly traded yield-oriented vehicles with more than 400,000 retail account holders in eight public companies, including the largest business development company (NASDAQ:ARCC) and the largest MLP-focused closed end fund (NYSE:KYN) in the United States. Upon closing, the merger is expected to be accretive to Ares’ economic net income, distributable earnings and fee-related earnings per unit. Ares Kayne is expected to provide the following benefits to its stakeholders:
• Enhanced investing expertise and advantages through a more expansive and comprehensive investment platform
• Complementary distribution channels across Ares’ deep institutional relationships and Kayne Anderson’s retail, high net worth, family office, and institutional investors
• More stable, high-quality and diverse revenue streams based on greater long-lived capital and meaningful growth driven by strong investment performance
“We have long known and admired Kayne Anderson as an industry leader in energy, energy infrastructure, real estate and other asset classes, and this merger will make us a differentiated investment manager with five market-leading businesses. We expect the combination will make us better investors by greatly enhancing our expertise in these compelling sectors and will create new opportunities as we leverage each other’s complementary investor bases to expand our distribution,” says Tony Ressler, Ares Chairman and CEO. “In addition, Kayne Anderson adds long-lived capital and significantly increases our fee-related earnings, which we expect will make this merger meaningfully accretive to Ares’ unit holders.”
Founded in 1984, Kayne Anderson has approximately 110 investment professionals across eight US offices managing investments across energy and energy infrastructure, specialty real estate, middle market credit and growth private equity. Upon closing, Kayne Anderson Chairman and Founder Richard Kayne and Ares Chairman and CEO Ressler will serve together as Co-Chairmen of Ares Kayne Management, L.P.
“We have always held a value of being above-average investors for ourselves and, most importantly, for our clients. We place great emphasis on the development of competitive advantages and believe we have achieved them in our core strategies, allowing us to generate attractive, risk-adjusted returns for our investors,” Kayne said. “Merging with Ares, whom we have admired for years, adds more competitively advantaged strategies for our clients, in addition to fortifying the firm’s long-term management capabilities. I am delighted by, and committed to, the future of Ares Kayne as evidenced by my willingness to essentially swap equity for equity.”
Kayne Anderson President and CEO Robert Sinnott will become Chairman of the newly-formed Energy Group at Ares Kayne, which will include all of Kayne’s energy investment activities including energy private equity, private energy income and energy infrastructure marketable securities. Substantially all of Kayne Anderson’s non-energy investment professionals will join Ares’ existing investment groups in Private Equity, Real Estate and Direct Lending. The two companies will continue to manage their existing funds and operate under their existing brand names.
In addition to Kayne, Sinnott and Kevin McCarthy of Kayne Anderson will join Ares Kayne’s Board of Directors and Sinnott, McCarthy and Al Rabil will join Ares Kayne’s Management Committee. Ressler, Michael Arougheti and Michael McFerran will continue their respective roles as Chief Executive Officer, President and Chief Financial Officer. Kayne Anderson employees will generally be restricted until May 2016 from transferring any equity received in connection with the transaction and will also be subject to phased lockup restrictions on sales through 2021, similar to existing Ares employee unit holders.
“This combination reinforces our shared views on building a uniquely positioned, global asset manager with a comprehensive array of products, a diverse investor base and long-lived capital to provide growth and stability that reflect the best attributes of both alternative and traditional asset managers,” says Arougheti. “We believe the advantages of the combined company will be beneficial to our fund investors, unit holders and employees. We are excited that our two firms share common cultural ideals centred on collaboration and empowerment, which we believe will continue to make us successful.”
