ARES
Ares Management CORP
NYSE
8-K: Ares Management Issues $1.5 Billion in Mandatory Convertible Preferred Stock to Fund Acquisition and General Purposes
Sentiment:
Capital Raise Announcement
10 October 2024 4:50 PM
Ares Management Corporation has successfully issued 30 million shares of its new 6.75% Series B Mandatory Convertible Preferred Stock, raising $1.5 billion to finance a major acquisition and for general corporate needs.
Capital raise
Ares Management Corporation issued 30 million shares of 6.75% Series B Mandatory Convertible Preferred Stock, raising $1.5 billion.
The offering included an underwriter option for an additional 3 million shares, which was fully exercised.
The net proceeds from the offering will be used to fund a portion of the cash consideration for the acquisition of GLP Capital Partners' international business and for general corporate purposes.
Summary
- Ares Management Corporation issued 30 million shares of 6.75% Series B Mandatory Convertible Preferred Stock, raising $1.5 billion.
- The offering included an underwriter option for an additional 3 million shares, which was fully exercised.
- The preferred stock ranks senior to the company's Class A common stock in terms of dividend payments and asset distribution upon liquidation.
- Dividends on the preferred stock will accumulate at an annual rate of 6.75% and will be paid quarterly, starting January 1, 2025, and ending October 1, 2027.
- The company has the option to pay dividends in cash, shares of common stock, or a combination of both.
- Each share of preferred stock will automatically convert into between 0.2717 and 0.3260 shares of common stock on or about October 1, 2027.
- The conversion rate will be determined based on the average stock price over the 20 trading days before the conversion date.
- The net proceeds from the offering will be used to fund a portion of the cash consideration for the acquisition of GLP Capital Partners' international business and for general corporate purposes.
- Ares may invest the net proceeds in short-term investments or repay borrowings under its subsidiaries revolving credit facility pending their use.
Sentiment
Score: 7
Explanation: The document is generally positive, detailing a successful capital raise and strategic acquisition. However, there are some risks associated with the conversion and integration of the acquired business.
Positives
- The offering successfully raised $1.5 billion, providing substantial capital for the company.
- The preferred stock offering provides a flexible financing option with a fixed dividend rate and potential for conversion to common stock.
- The funds will support a strategic acquisition and general corporate growth initiatives.
- The company has the flexibility to pay dividends in cash, shares, or a combination of both.
Negatives
- The preferred stock ranks senior to common stock, potentially diluting the value of existing common shares.
- The conversion rate is subject to market fluctuations, which could impact the value of the preferred stock at conversion.
- The company is subject to certain restrictions on declaring dividends on or repurchasing common stock if accumulated dividends on the preferred stock are not paid in full.
Risks
- The company's ability to successfully integrate the acquired business and achieve expected benefits is subject to various risks and uncertainties.
- The conversion rate of the preferred stock is dependent on the future performance of the company's common stock.
- The company's ability to pay dividends on the preferred stock is subject to the availability of legally available funds.
- The company may not be able to use the proceeds from the offering as intended if the acquisition is terminated or the board determines it will not occur.
Future Outlook
The company intends to use the net proceeds from the offering for the acquisition of GLP Capital Partners' international business and for general corporate purposes, including repayment of debt, other strategic acquisitions and growth initiatives. The company may also invest the net proceeds in short-term investments or repay borrowings under its subsidiaries revolving credit facility pending their use.
Industry Context
This offering is part of a broader trend of alternative asset managers seeking capital to fund acquisitions and growth. The use of mandatory convertible preferred stock allows Ares to raise capital while providing investors with a fixed income component and the potential for equity upside.
Comparison to Industry Standards
- The 6.75% dividend rate is within the typical range for preferred stock offerings by financial institutions.
- The mandatory conversion feature is a common structure for preferred stock offerings, providing a clear path to equity conversion.
- The use of proceeds for acquisitions and general corporate purposes is consistent with industry practices for capital raises.
- Comparable companies such as Blackstone, Apollo, and KKR have also utilized similar financing strategies to fund growth and acquisitions.
Stakeholder Impact
- Shareholders will see potential dilution from the conversion of the preferred stock.
- Employees may see changes related to the acquisition of GLP Capital Partners' international business.
- Customers may see changes in services or products as a result of the acquisition.
- Creditors may see changes in the company's debt structure.
Next Steps
- The company will use the net proceeds from the offering for the acquisition of GLP Capital Partners' international business and for general corporate purposes.
- The company will list the preferred stock on the New York Stock Exchange.
- The company will monitor the performance of its common stock in relation to the conversion rate of the preferred stock.
Key Dates
- February 27, 2023: Shelf registration statement on Form S-3ASR filed with the SEC.
- October 4, 2024: Date of the Transaction Agreement for the acquisition of GLP Capital Partners' international business.
- October 8, 2024: Date of the Underwriting Agreement and the initial pricing of the preferred stock offering.
- October 9, 2024: Underwriters exercised their option to purchase additional shares.
- October 10, 2024: Closing date of the preferred stock offering and filing of the Certificate of Designations.
- January 1, 2025: First quarterly dividend payment date for the preferred stock.
- October 1, 2027: Scheduled mandatory conversion date for the preferred stock.
Keywords
Mandatory Convertible Preferred Stock, Ares Management Corporation, Capital Raise, Acquisition, GLP Capital Partners, Preferred Stock, Dividend, Conversion, Underwriting, Public Offering
ARES
Ares Management CORP
NYSE
Sector: Financial Services
Filings with Classifications
Worse than expected
13 June 2025 4:32 PM
Insider Transaction Report
- The sale of 2,250,000 shares by a significant insider (10% owner and director) like Ares Management LLC is generally perceived negatively by the market, as it can signal a lack of confidence or a strategic reduction in exposure to the company.
- Such a large divestment can put downward pressure on the stock price and may be interpreted as a bearish signal.
Worse than expected
10 May 2025 12:28 AM
Quarterly Report
- Net income attributable to Ares Management Corporation Class A and non-voting common stockholders decreased to $21.9 million from $73 million in the prior year period.
Better than expected
3 May 2025 12:51 AM
Quarterly Report
- Ares Management Corporation's AUM surpassed $545 billion in Q1 2025, exceeding expectations.
- After-tax realized income reached $381.4 million, translating to $1.09 per share, which is better than anticipated.
- Fee related earnings were $367.3 million for the quarter, surpassing previous forecasts.
Better than expected
5 February 2025 6:17 AM
Earnings Release
- Ares Management reported record fundraising and AUM, indicating strong investor confidence and growth potential.
- The company's key financial metrics, such as Fee Related Earnings and Realized Income, showed significant increases compared to the previous year.
Worse than expected
29 November 2024 4:50 PM
SEC Form 4 Filing
- Ares Management, a significant shareholder, selling shares is generally viewed negatively by the market as it can indicate a lack of confidence in the company's future prospects.
Worse than expected
26 November 2024 4:39 PM
SEC Form 4 Filing
- The document indicates a reduction in stake by a major shareholder, which is generally viewed negatively by the market.
Capital raise
8 November 2024 6:07 AM
Quarterly Report
- In October 2024, Ares issued 30,000,000 shares of its Series B mandatory convertible preferred stock for total proceeds of $1,462.5 million.
- In October 2024, Ares issued $750.0 million in aggregate principal amount of 5.60% senior notes with a maturity date of October 2054.
Better than expected
8 November 2024 6:07 AM
Quarterly Report
- The company's total revenues, management fees, carried interest allocation, and net income all increased significantly compared to the same period last year.
Better than expected
31 October 2024 7:19 PM
Quarterly Report
- The company's financial results exceeded expectations with strong growth in key metrics, including AUM, fee-related earnings, and realized income.
- The company's fundraising momentum and capital deployment were better than anticipated, leading to an optimistic outlook for the remainder of the year.
Capital raise
31 October 2024 7:19 PM
Quarterly Report
- In October 2024, Ares issued 30,000,000 shares of its Series B mandatory convertible preferred stock, for total proceeds of $1,462.5 million (after deducting underwriting discounts but before offering expenses).
Capital raise
11 October 2024 4:42 PM
Debt Issuance
- Ares Management Corporation issued $750 million in senior notes.
- The company also entered into an underwriting agreement to issue 27,000,000 shares of 6.75% Series B Mandatory Convertible Preferred Stock, with an option for an additional 3,000,000 shares to cover over-allotments.
Capital raise
10 October 2024 4:50 PM
Capital Raise Announcement
- Ares Management Corporation issued 30 million shares of 6.75% Series B Mandatory Convertible Preferred Stock, raising $1.5 billion.
- The offering included an underwriter option for an additional 3 million shares, which was fully exercised.
- The net proceeds from the offering will be used to fund a portion of the cash consideration for the acquisition of GLP Capital Partners' international business and for general corporate purposes.
Capital raise
8 October 2024 6:03 AM
Merger Announcement
- Ares has secured a $2.0 billion bridge loan facility to finance the cash portion of the acquisition.
- The company expects to finance the cash portion of the acquisition with a combination of cash on hand and other equity or debt financing, which may include equity or debt securities issued in one or more capital markets transactions.
Worse than expected
6 August 2024 7:27 PM
Quarterly Report
- Net income attributable to common stockholders decreased compared to the same period last year.
- Carried interest allocation was negative for both the quarter and six months ended June 30, 2024, compared to positive figures in the same periods of 2023.
Capital raise
6 August 2024 7:27 PM
Quarterly Report
- The company issued and sold 2,650,000 shares of Class A common stock in an offering that closed on June 14, 2024, resulting in net proceeds of approximately $354.4 million.
- Subsequent to June 30, 2024, the underwriters exercised the 30-day option to purchase additional shares of Class A common stock, resulting in additional proceeds of $52.9 million.
Better than expected
1 August 2024 9:13 PM
Quarterly Report
- The company achieved record gross fundraising and the second-highest level of capital deployment in its history, indicating better than expected operational performance.
Capital raise
11 July 2024 5:14 PM
Capital Raise Update
- Ares Management Corporation raised approximately $52.92 million through the sale of additional shares.
- The total net proceeds from the offering, including the initial sale, reached approximately $408.21 million.
Capital raise
14 June 2024 4:15 PM
Capital Raise Announcement
- Ares Management Corporation raised approximately $356 million through the sale of 2,650,000 shares of Class A common stock.
- The underwriters have an option to purchase an additional 397,500 shares within 30 days, which could result in further capital being raised.
Worse than expected
8 May 2024 8:28 PM
Quarterly Report
- Net income attributable to common stockholders decreased by 22% year-over-year, indicating worse than expected results.
- Carried interest allocation decreased significantly to a loss of $32.5 million, primarily due to reversals in private equity and real estate funds, indicating worse than expected results.
Better than expected
1 May 2024 9:54 PM
Quarterly Report
- The company's AUM grew by 19% year-over-year, exceeding expectations.
- The company raised $17.4 billion in gross new capital, indicating strong investor confidence.
- Available capital reached a record high of $114.6 billion, positioning the company for future growth.
Better than expected
7 February 2024 9:30 PM
Quarterly Report
- The company's AUM, FPAUM, and available capital all reached record levels, indicating strong growth and investor confidence.
- The company's fundraising efforts were highly successful, exceeding expectations and positioning them for future growth.
- The company's after-tax realized income per share increased year-over-year, demonstrating improved profitability.
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