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Ares Management, Kayne Anderson Announce Merger to Form Ares Kayne Management

July 24, 2015, 07:59 AM
Filed Under: Mergers & Acquisitions

Ares Management, L.P. and Kayne Anderson Capital Advisors, L.P. announced they have entered into a definitive merger agreement to create Ares Kayne Management, L.P., one of the largest and most diversified alternative asset managers with a combined $113 billion of assets under management as of March 31, 2015. Under the terms of the agreement, Ares will provide $2.55 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 $87 billion in assets under management, with Kayne Anderson, a leading U.S. energy and energy infrastructure investor with $26 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 ARCC, -1.53% and the largest MLP-focused closed end fund KYN, -1.97% 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,” said 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 U.S. 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.

Moelis & Company and BofA Merrill Lynch served as financial advisors to Ares, and Wells Fargo Securities, LLC served as a financing advisor. Proskauer Rose LLP served as Ares’ legal counsel. J.P. Morgan Securities LLC served as financial advisor to Kayne Anderson. Paul Hastings LLP served as Kayne Anderson’s legal counsel.

Ares is a publicly traded, leading global alternative asset manager with approximately $87 billion of assets under management as of March 31, 2015 and more than 15 offices in the United States, Europe and Asia.

Kayne Anderson, founded in 1984, is a leading independent alternative investment management firm focused on niche investing in energy and energy infrastructure, specialized real estate, middle market credit, and growth private equity.

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