Ares Management Announces Launch of Offering of Series B Mandatory Convertible Preferred Stock

Rhea-AI Summary

Ares Management (NYSE: ARES) has announced the launch of an underwritten public offering of 27,000,000 shares of Series B Mandatory Convertible Preferred Stock. The company plans to grant underwriters a 30-day option to purchase up to 3,000,000 additional shares. The net proceeds will be used for:

• Partial payment of cash consideration for the acquisition of GLP Capital Partners 's international business (excluding Greater China operations)
• General corporate purposes, including debt repayment and strategic acquisitions

The Mandatory Convertible Preferred Stock will have a liquidation preference of $50 per share and will automatically convert into Ares' Class A Common Stock on or about October 1, 2027. Morgan Stanley and Citigroup are acting as joint bookrunning managers for the offering.

Positive

• Potential for increased capital through the public offering of 27,000,000 shares
• Acquisition of GLP Capital Partners 's international business, expanding Ares' global presence
• Flexibility for general corporate purposes, including debt repayment and strategic acquisitions

Negative

• Potential dilution of existing shareholders' equity due to the conversion of preferred stock to common stock
• Increased financial obligations due to dividend payments on the preferred stock
• Risk of share price fluctuation affecting the conversion rate of preferred stock

Insights

Financial Analyst

Ares Management's launch of a Series B Mandatory Convertible Preferred Stock offering is a significant move to raise capital, primarily for funding the GCP International acquisition. This $1.35 billion offering (assuming $50 per share) could expand to $1.5 billion if overallotment options are exercised.

Key points to consider:

• The offering provides flexibility in capital structure, potentially reducing immediate dilution compared to common stock issuance.
• Mandatory conversion in 2027 aligns with long-term growth strategies, giving Ares time to integrate GCP International and potentially increase share value.
• The redemption option if the GCP acquisition fails mitigates risk for both Ares and investors.
• This move may impact Ares' debt-to-equity ratio and could affect future borrowing capacity.

While the offering strengthens Ares' position for the GCP acquisition, investors should monitor how effectively the company deploys this capital and integrates GCP International to drive long-term value.

Investment Strategist

This offering marks a strategic financial maneuver by Ares Management, showcasing its commitment to growth through the GCP International acquisition. The use of mandatory convertible preferred stock is particularly noteworthy:

• It provides near-term capital without immediate common stock dilution, potentially preserving earnings per share in the short term.
• The mandatory conversion feature creates a clear timeline for equity conversion, which could be attractive to investors seeking both fixed income and equity exposure.
• The offering's size relative to Ares' $32.2 billion market cap (~4.2% to 4.7%) is substantial but not overwhelming, indicating a balanced approach to financing.

Investors should closely watch the pricing and terms of this offering, as they will reveal market sentiment towards Ares' growth strategy and the perceived value of the GCP International acquisition. The success of this capital raise could set the stage for Ares' expansion in the alternative asset management space.

NEW YORK--(BUSINESS WIRE)-- Ares Management Corporation (NYSE: ARES) (“Ares” or the “Company”) today announced the launch of an underwritten public offering (the “Offering”) of 27,000,000 shares of Series B Mandatory Convertible Preferred Stock, par value $0.01 per share (“Mandatory Convertible Preferred Stock”), of the Company. Ares expects to grant to the underwriters of the Offering a 30-day option to purchase up to 3,000,000 additional shares of Mandatory Convertible Preferred Stock solely to cover over-allotments. Ares intends to use the net proceeds from the Offering for (i) the payment of a portion of the cash consideration due in respect of the Company’s previously announced acquisition of the international business of GLP Capital Partners Limited and certain of its affiliates, excluding its operations in Greater China (“GCP International”), and existing capital commitments to certain managed funds (the “GCP Acquisition”) and related fees, costs and expenses and/or (ii) general corporate purposes, including repayment of debt, other strategic acquisitions and growth initiatives. Pending such use, Ares may invest the net proceeds in short-term investments and/or repay borrowings under its subsidiaries’ revolving credit facility.

Morgan Stanley and Citigroup are acting as joint bookrunning managers for the Offering.

The Mandatory Convertible Preferred Stock is expected to have a liquidation preference of $50 per share. Unless previously converted or redeemed, each share of Mandatory Convertible Preferred Stock will automatically convert, for settlement on or about October 1, 2027 (subject to postponement in certain limited circumstances), into a variable number of shares of Ares’ Class A Common Stock, par value $0.01 per share. Ares will have the right to redeem all, but not less than all, of the Mandatory Convertible Preferred Stock if the GCP Acquisition is not completed within a specified period of time. The dividend rate, conversion terms and other terms of the Mandatory Convertible Preferred Stock will be determined at the time of pricing of the Offering and remain subject to change.

A registration statement on Form S-3 relating to these securities has been filed with the Securities and Exchange Commission (the “SEC”) and has become effective. The Offering may be made only by means of a preliminary prospectus supplement and accompanying prospectus. A copy of the preliminary prospectus supplement and accompanying prospectus related to the Offering can be obtained for free by visiting the SEC’s website at http://www.sec.gov or by contacting Morgan Stanley, 180 Varick Street, 2nd Floor, New York, New York 10014, Attention: Prospectus Department; or Citigroup Global Markets Inc., c/o Broadridge Financial Solutions, 1155 Long Island Avenue, Edgewood, New York 11717, or by email at batprospectusdept@citi.com, or by telephone: (800) 831-9146.

This press release does not constitute an offer to sell or a solicitation of an offer to buy these securities, nor does it constitute an offer, solicitation or sale of these securities in any jurisdiction in which such offer, solicitation or sale is unlawful. Nothing in this press release constitutes an offer to sell or solicitation of an offer to buy any securities of Ares or an investment fund managed by Ares or its affiliates.

About Ares Management Corporation

Ares Management Corporation (NYSE: ARES) is a leading global alternative investment manager offering clients complementary primary and secondary investment solutions across the credit, real estate, private equity and infrastructure asset classes. We seek to provide flexible capital to support businesses and create value for our stakeholders and within our communities. By collaborating across our investment groups, we aim to generate consistent and attractive investment returns throughout market cycles. As of June 30, 2024, Ares Management Corporation’s global platform had over $447 billion of assets under management, with more than 2,950 employees operating across North America, Europe, Asia Pacific and the Middle East.

Forward-Looking Statements

Statements included herein contain forward-looking statements within the meaning of the federal securities laws. You can identify these forward-looking statements by the use of forward-looking words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates,” “foresees” or negative versions of those words, other comparable words or other statements that do not relate to historical or factual matters. The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. Such forward-looking statements are subject to various risks and uncertainties, including our ability to consummate the Offering and the GCP Acquisition and to effectively integrate GCP International into our operations and to achieve the expected benefits therefrom, and assumptions, including those relating to the GCP Acquisition, the Offering and the intended use of proceeds, our operations, financial results, financial condition, business prospects, growth strategy and liquidity. Some of these factors are described in the Annual Report on Form 10-K for the year ended December 31, 2023, including under the headings “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in the Quarterly Report on Form 10-Q filed with the SEC on August 7, 2024, including under the heading “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These factors should not be construed as exhaustive and should be read in conjunction with the risk factors and other cautionary statements that are included in this report and in our other periodic filings. If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our actual results may vary materially from those indicated in these forward-looking statements. New risks and uncertainties arise over time, and it is not possible for the Company to predict those events or how they may affect us. Therefore, you should not place undue reliance on these forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made. Ares does not undertake any obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

View source version on businesswire.com: https://www.businesswire.com/news/home/20241007930174/en/

Investors:

Greg Mason or Carl Drake

irares@aresmgmt.com

+1-888-818-5298

Source: Ares Management Corporation

FAQ

What is the purpose of Ares Management's Series B Mandatory Convertible Preferred Stock offering?

The offering aims to raise funds for the acquisition of GLP Capital Partners 's international business and for general corporate purposes, including debt repayment and strategic acquisitions.

How many shares of Series B Mandatory Convertible Preferred Stock is Ares Management (ARES) offering?

Ares Management is offering 27,000,000 shares of Series B Mandatory Convertible Preferred Stock, with an option for underwriters to purchase up to 3,000,000 additional shares.

When will the Ares Management (ARES) Series B Mandatory Convertible Preferred Stock convert to common stock?

The Series B Mandatory Convertible Preferred Stock will automatically convert into Ares' Class A Common Stock on or about October 1, 2027, unless previously converted or redeemed.

What is the liquidation preference of Ares Management's (ARES) new Series B Mandatory Convertible Preferred Stock?

The Series B Mandatory Convertible Preferred Stock is expected to have a liquidation preference of $50 per share.