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Ares Management Supports Ares Capital Corporation’s Acquisition of American Capital

January 04, 2017, 06:56 AM
Filed Under: Industry News

Ares Management, L.P. announced that it will begin earning fees on approximately $3 billion of incremental AUM as a result of the completion of Ares Capital Corporation’s acquisition of American Capital, Ltd., which closed on January 3, 2017. As a result of the acquisition, ARCC, the largest business development company in the U.S., increased its total assets from $9.1 billion to approximately $12.3 billion on a pro forma basis as of September 30, 2016, including a pro forma investment portfolio of $11.8 billion and 314 portfolio companies and cash of $0.2 billion.

As part of its commitment to growing its leadership position in the highly attractive direct lending asset class, Ares Management provided financial support for the transaction through its subsidiary Ares Capital Management LLC, which is the external manager of ARCC, including approximately $275 million in cash at closing and the future waiver of up to $10 million per quarter of ARCC’s Part I income based fees for ten calendar quarters, beginning in the second quarter of 2017, to the extent earned and payable by ARCC in each such quarter.

“This transaction is highly strategic and financially attractive to Ares Management as it helps us build upon our industry-leading franchise as a middle market direct lender. Whether investors come to Ares as shareholders in ARCC, through commingled funds or as part of a separately managed account, we believe that our market leadership, scaled platform in both the U.S. and Europe, and consistent performance in the sector will continue to add meaningful long-term value to our company and its unitholders,” said Tony Ressler, Chairman and Chief Executive Officer of Ares Management, L.P.

Since the transaction results in an increase in ARCC’s fee paying assets by approximately $3 billion on a pro forma basis as of September 30, 2016, Ares Management expects that the transaction will result in increased fees to Ares Management and, taking into account the transaction support described above, is expected to be accretive to both its distributable earnings and after-tax economic net income per unit (net of preferred unit distributions).

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