Ares Management is buying energy manager Kayne Anderson Capital Advisors in a $2.55 billion deal paid for with Ares operating group units, said Tony Ressler, Ares chairman and CEO.
The combined firm will be called Ares Kayne Management LP and will have a total of $113 billion of assets under management, based on the firms' AUM as of March 31. The transaction is expected to close around the beginning of 2016, subject to regulatory approvals, Kayne Anderson investor consents and other conditions. Ares Management accounts for $87 billion in assets and Kayne Anderson, $26 billion.
The addition of energy strategies will give the combined firm will five investment areas: tradable credit, direct lending, energy, private equity and real estate.
“We are adding energy expertise and real estate expertise particularly in the U.S.,” Mr. Ressler said. Less than 15% of Kayne Anderson's energy business is exposed to oil and gas prices as $17 billion to $18 billion is in master limited partnerships that make midstream investments. These investments are exposed to the fluctuations in the volume of oil being transported but not commodity prices, he said. Some $3 billion of Kayne Anderson's total assets under management is in upstream investments, which are affected by oil and gas prices.
Mr. Ressler added that he thinks there is a distressed energy investment opportunity.
“We see a play in distressed energy companies and energy credit. There are a lot of highly over-levered energy companies that will need restructuring and will need rescue capital,” he said.
The firms have complementary distribution channels. Both have retail and institutional clients; Kayne Anderson will add its network of high-net-worth and family office clients.
All of the investment professionals in Kayne Anderson's energy, real estate and growth private equity businesses will be joining the combined company. Not all of the investment professionals in Kayne Anderson's middle-market credit business will be joining the firm, but who will be leaving and who will be staying has not yet been determined, Mr. Ressler said.
Paul Blank, a managing director at Kayne Anderson, could not be reached by deadline.
At closing, Richard Kayne, Kayne Anderson chairman and founder, and Mr. Ressler will be co-chairmen of the combined firm. Robert Sinnott, Kayne Anderson president and CEO, will be chairman of Ares Kayne's new energy group.
Mr. Kayne, Mr. Sinnott and Kevin McCarthy, managing partner of Kayne Anderson, will join Ares Kayne's board of directors and Mr. Sinnott, Mr. McCarthy and Al Rabil, managing partner and head of Kayne Anderson's real estate arm, will join Ares Kayne's management committee.
Mr. Ressler, Michael Arougheti and Michael McFerran will continue as CEO, president and chief financial officer, respectively. Kayne Anderson employees and Ares employee unitholders will generally be restricted until May 2016 from transferring any equity received from the deal and will also be subject to phased lockup restrictions on sales through 2021.
