Ares Management and Kayne Anderson Capital Advisors have entered into a merger agreement to create Ares Kayne Management, an alternative asset manager with a combined $113 billion of assets under management.
Under the agreement Ares Management will provide $2.5 billion in consideration to Kayne Anderson, the majority of which will be in the form of equity interests. Kayne Anderson Chairman and Founder Richard Kayne and Ares Chairman and CEO Tony Ressler will serve together as Co-Chairmen of Ares Kayne. The transaction is expected to close on or around January 1, 2016.
“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,” said Mr. Kayne. “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.”
The new firm combines Ares Management, an alternative asset manager with $87 billion in assets under management, with Kayne Anderson, a US energy and energy infrastructure investor with $26 billion in assets under management.
Ares Management – with $87 billion in assets under management – invests in private equity, leveraged loans, high-yield bonds, distressed debt and private debt. Within Ares, its private equity group manages $10 billion of assets and is currently investing its fourth private equity fund with $4.7 billion of committed capital. Ares Management is headquartered in Los Angeles with offices in New York, London, Chicago, and Atlanta (www.aresmgmt.com).
Kayne Anderson – with $26 billion in assets under management – focuses on investing in energy, energy infrastructure, growth equity, specialty real estate and middle market credit. Kayne Anderson is entirely owned by its investment professionals and management. The firm was founded in 1984 and is headquartered in Los Angeles with offices in Houston, New York, Chicago, Denver, Dallas, Atlanta and Boca Raton (www.KayneCapital.com).
The merged entity will invest in tradable credit, direct lending, energy, private equity and real estate. “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,” said Mr. Ressler, Ares Chairman and CEO.
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 Mr. Kayne, Mr. Sinnott and Kevin McCarthy of Kayne Anderson will join Ares Kayne’s Board of Directors and Mr. Sinnott, Mr. McCarthy and Al Rabil will join Ares Kayne’s Management Committee. Mr. Ressler, Michael Arougheti and Michael McFerran will continue their respective roles as Chief Executive Officer, President and Chief Financial Officer.
Kayne Anderson employees will be restricted until May 2016 from transferring any equity received in connection with the transaction and will also be subject to lockup restrictions on sales through 2021.
Moelis & Company and BofA Merrill Lynch served as financial advisors to Ares, and Wells Fargo Securities served as a financing advisor. Proskauer Rose served as Ares’ legal counsel. JPMorgan Securities served as financial advisor to Kayne Anderson. Paul Hastings served as Kayne Anderson’s legal counsel.
© 2015 PEPD • Private Equity’s Leading News Magazine • 7-27-15