Ares and Kayne Anderson Initiate $113B Merger

LOS ANGELES—Ares Management and Kayne Anderson Capital Advisors have entered into a definitive merger agreement, becoming the largest alternative asset manger with a combined $113 billion in assets. The combined company will operate as Ares Kayne Management. Ares Management will provide $2.55 billion in consideration for the merger, mostly in the form of Ares Operating Group Units, as well as cash. The transaction is expected to close in January 2016.

The two firms are headquartered one block from each other in Los Angeles. Ares Management has $87 billion under management internationally, while Kayne Anderson, which is focused on energy and infrastructure investing in the US, has $26 billion in assets under management. Once fully integrated, the firm will have 450 investment professionals in 20 offices and 2,700 direct investors. Richard Kayne, of Kayne Anderson, and Tony Ressler, of Ares Management, will serve as co-chairman of the combined company. Ares president Mike Arougheti will serve as president of the newly integrated firm, and Bob Sinnott, Kayne's CEO will serve as chairman of energy.

The new company will focus on five investment groups, including tradable credit, direct lending, energy, private equity and real estate. Both firms declined to comment on the transaction; however, during a media conference, Ressler said, “Our IPO last year with the resulting public currency and increased brand exposure, along with our growth trajectory have lead to a whole series of interesting strategic introductions across the globe. With that said, we have for some time been the most focused on doing something extremely transformational with our good friends at Kayne Anderson, who conveniently have their Los Angeles headquarters only a block away from ours. As Ares stakeholders have come to appreciate, any proposed transaction for us, in addition to being economically accretive to earnings, has to achieve certain strategic advantages. We believe we have found the ideal partner in Kayne Anderson.”

Stakeholders can expect more robust investing expertise and an enhanced investing platform, expanded relationships with institutional investors and more diverse revenue streams delivered through a strong investment performance. “We believe the combination will make us better investors,” added Ressler at the conference.

In June of this year, GlobeSt.com reported that the firm was in talks about a possible merger. Industry sources say that Ressler and Kayne became good friends before discussing the possibilities of a merger.

As a condition of the merger, Kayne Anderson employees will be restricted from transferring equity from the transaction until May 2016 and will be subject to a lockup on sales through 2021. Ares employee unit holders will be subject to similar restrictions. At closing, Ares Kayne employees will own approximately 80% of the combined company, according to Ressler. Additionally, no major changes will be made to the firm's investment processes.