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

Rhea-AI Summary

Ares Management (NYSE: ARES) has announced the pricing of its public offering of 27,000,000 shares of Series B Mandatory Convertible Preferred Stock at $50.00 per share. The offering is expected to close on October 10, 2024. Ares intends to use the net proceeds for the GCP Acquisition and general corporate purposes.

The Mandatory Convertible Preferred Stock will accumulate cumulative dividends at a rate of 6.75% per annum on the $50 liquidation preference. Unless previously converted or redeemed, each share will automatically convert into 0.2717 to 0.3260 shares of Ares' Class A Common Stock on October 1, 2027. Ares has granted underwriters a 30-day option to purchase up to an additional 3,000,000 shares.

Positive

• Raising significant capital through 27,000,000 shares offering at $50.00 per share
• Potential for additional capital with 3,000,000 share over-allotment option
• 6.75% dividend rate on Mandatory Convertible Preferred Stock
• Proceeds to be used for strategic acquisition (GCP International) and general corporate purposes

Negative

• Potential dilution of existing shareholders upon conversion of Preferred Stock
• Increased dividend obligations due to new Preferred Stock issuance

Insights

Financial Analyst

Ares Management's pricing of $1.35 billion in Series B Mandatory Convertible Preferred Stock is a significant capital raise, indicating strong investor interest. The 6.75% dividend rate is attractive in the current market environment. This offering provides Ares with substantial liquidity for its GCP International acquisition and other strategic initiatives.

The conversion terms, allowing for 0.2717 to 0.3260 shares of Class A Common Stock per preferred share, suggest a potential dilution range of 7.3% to 8.8% based on current shares outstanding. This structure balances the company's need for capital with existing shareholders' interests.

The option to redeem if the GCP acquisition doesn't close provides a safeguard for the company, while the investors' right to convert early offers flexibility. Overall, this offering strengthens Ares' financial position for growth but comes at the cost of future dilution and dividend obligations.

Investment Banker

The successful pricing of this large preferred stock offering demonstrates Ares Management's strong market position and investor confidence in its growth strategy. The use of mandatory convertible preferred stock is a savvy financial engineering move, allowing Ares to raise equity-like capital at a fixed dividend rate while deferring dilution.

The impressive syndicate of underwriters, led by top-tier investment banks, speaks to the deal's significance and Ares' relationships in the financial community. The overallotment option could potentially increase the offering size to $1.5 billion, providing additional flexibility.

This capital raise positions Ares well for the GCP International acquisition and future growth initiatives. It also demonstrates the company's ability to access capital markets efficiently, which is important for an alternative asset manager. The structure and timing of this offering suggest a well-planned approach to financing their expansion strategy.

NEW YORK--(BUSINESS WIRE)-- Ares Management Corporation (NYSE: ARES) (“Ares” or the “Company”) today announced the pricing of its previously announced 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 at a public offering price of $50.00 per share of Mandatory Convertible Preferred Stock. In addition, Ares has granted to the underwriters of the Offering a 30-day option to purchase up to an additional 3,000,000 shares of Mandatory Convertible Preferred Stock at the public offering price, less underwriting discounts and commissions, solely to cover over-allotments. The Offering is expected to close on or about October 10, 2024, subject to customary closing conditions.

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.

The Mandatory Convertible Preferred Stock will accumulate cumulative dividends at a rate per annum equal to 6.75% on the liquidation preference thereof, which is $50 per share, payable when, as and if declared by Ares’ board of directors, quarterly in arrears on January 1, April 1, July 1 and October 1 of each year, beginning on January 1, 2025 and ending on, and including, October 1, 2027. Unless previously converted or redeemed, each outstanding share of Mandatory Convertible Preferred Stock will automatically convert, for settlement on or about October 1, 2027, into between 0.2717 and 0.3260 shares of Ares’ Class A Common Stock, par value $0.01 per share, subject to customary anti-dilution adjustments. The preferred stockholders will have the right to convert all or any portion of their shares of Mandatory Convertible Preferred Stock at any time before the mandatory conversion settlement date. Ares will have the right to redeem all, but not less than all, of the Mandatory Convertible Preferred Stock if the GCP Acquisition has not closed within a specified period of time.

Morgan Stanley & Co. LLC, Citigroup Global Markets Inc., Barclays Capital Inc., Goldman Sachs & Co. LLC, BofA Securities, Inc., Jefferies LLC, J.P. Morgan Securities LLC and Wells Fargo Securities, LLC are acting as joint book-running managers for the offering. Ares Management Capital Markets LLC, BNY Mellon Capital Markets, LLC, Deutsche Bank Securities Inc., MUFG Securities Americas Inc., Truist Securities, Inc., RBC Capital Markets, LLC, UBS Securities LLC, U.S. Bancorp Investments, Inc., Academy Securities, Inc., Loop Capital Markets LLC, R. Seelaus & Co., LLC, Samuel A. Ramirez & Company, Inc. and Siebert Williams Shank & Co., LLC are acting as co-managers for the offering.

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 prospectus supplement and accompanying prospectus. A copy of the final prospectus supplement and accompanying prospectus related to the Offering can be obtained, when available, 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/20241008416993/en/

Investors:

Greg Mason or Carl Drake

irares@aresmgmt.com

+1-888-818-5298

Source: Ares Management Corporation

FAQ

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

Ares Management (NYSE: ARES) has priced its Series B Mandatory Convertible Preferred Stock offering at $50.00 per share for 27,000,000 shares.

When is the expected closing date for Ares Management's Preferred Stock offering?

The offering is expected to close on or about October 10, 2024, subject to customary closing conditions.

What is the dividend rate for Ares Management's new Preferred Stock?

The Series B Mandatory Convertible Preferred Stock will accumulate cumulative dividends at a rate of 6.75% per annum on the $50 liquidation preference.

When will Ares Management's Preferred Stock convert to Common Stock?

Unless previously converted or redeemed, each share of Preferred Stock will automatically convert into Ares' Class A Common Stock on or about October 1, 2027.