Ares, Kayne in $2.55bn merger

The deal will create an alternative asset powerhouse with $113bn under management.

Less than a year after acquiring Energy Investors Funds (EIF), Los Angeles-based alternative assets manager Ares Management (Ares) has decided to merge with Kayne Anderson, another energy investment firm. Ares Kayne, the new company, will have combined assets under management totalling $113 billion, making it one of the largest and most diversified alternative assets manager in the world, the firm said in a statement.

Ares will fund the $2.55 billion deal through a combination of cash, debt and new equity.

According to a presentation issued by the firm on Friday, Ares and Kayne Anderson employees are expected to own approximately 50 percent and 30 percent of the combined company, respectively.

In addition to generating benefits for the two firms’ investors, owners and employees, the transaction “meaningfully benefits Ares by adding a market-leading energy platform, solidifying our real estate expertise and enhancing our direct lending and private equity platforms,” Ares stated in the presentation.

All senior-level management is expected to remain in place. Ares’s chairman and chief executive Tony Ressler and Kayne Anderson founder and chairman Richard Kayne will serve as co-chairmen of the combined firm, while Ressler will also serve as chief executive. Ares’s Michael Arougheti and Michael McFerran will continue their respective roles as president and chief financial officer.

Kayne Anderson president and chief executive 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. Kayne Anderson’s non-energy investment professionals will join Ares’s existing investment groups in private equity, real estate and direct lending. The new asset management firm will invest across tradable credit, direct lending, energy, private equity and real estate.

The two companies will continue to manage their existing funds and operate under their existing brand names, according to the statement. It was unclear whether this strategy would also apply to future funds. Neither Ares nor Kayne Anderson responded to a request for comment.

“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,” Ressler said.

The combined firm will have approximately 450 investment professionals in over 20 offices worldwide serving more than 2,700 direct investors.

Another benefit of the merger, according to Ares, is the complementary mix of distribution channels. While 85 percent of Ares’s clients are pension funds, banks, sovereign wealth funds and insurance companies, the majority of Kayne Anderson’s direct relationships – around 70 percent – are with high net worth individuals, family offices and endowments.