NEW YORK - Ares Management Corporation (NYSE:ARES), a global alternative investment manager, announced the definitive agreement to acquire the international business of GLP Capital Partners Limited (GCP International), excluding its Greater China operations, for $3.7 billion. The deal comprises approximately $1.8 billion in cash and $1.9 billion in Ares Class A Common Shares. The acquisition is expected to be completed in the first half of 2025, subject to regulatory approvals and other conditions.
GCP International manages $44 billion in assets as of June 30, 2024, focusing on new economy sectors like industrial real estate and digital infrastructure. This strategic move will nearly double Ares Real Estate's assets under management to about $96 billion and expand its global reach across North America, Europe, Asia, and Latin America.
Ares' CEO and President, Michael Arougheti, highlighted the alignment between the two companies in investing and managing assets that facilitate the modern economy. He emphasized the potential for the combined entity to become a powerhouse in global real assets investing.
The acquisition is structured to ensure leadership continuity at GCP International, with a substantial majority of the consideration for GCP International's management and employees to be paid in Ares stock, subject to long-term retention mechanisms. This is intended to align the interests of GCP International's leadership with those of Ares' fund clients and stockholders.
GCP International's experience in managing industrial properties, including over 320 million square feet as of June 30, 2024, and its reputation in global data center operations, with large hyperscale development projects underway, are key factors in this transaction. The combined expertise is expected to position Ares as a top global owner and operator of industrial assets.
The transaction is projected to be modestly accretive to Ares' after-tax realized income per share of Class A and non-voting common stock in the first full calendar year following the acquisition, with higher accretion anticipated in subsequent years.
Ming Mei, Co-Founder and CEO of GCP and GLP, expressed enthusiasm for the opportunities the merger will create for clients and for the continued partnership in driving the success of the combined business.
The transaction will be financed with fully committed bridge financing from Morgan Stanley Senior Funding, Inc. and Citigroup Global Markets Inc. Ares and GCP International's advisors include Eastdil Secured, Barclays, Goldman Sachs & Co. LLC, and Wells Fargo Securities, LLC, with Latham & Watkins acting as legal counsel for Ares. GCP International was advised by Citigroup, Morgan Stanley & Co. LLC, Greenhill (NYSE:GHL), a Mizuho affiliate, UOB Group, Deutsche Bank, and Kirkland & Ellis LLP as legal counsel.
This article is based on a press release statement from Ares Management Corporation.
In other recent news, Ares Management Corp has been active on the acquisition front. The investment firm has agreed to purchase the non-China operations of GLP Capital Partners, a deal that could potentially reach $5 billion over time, contingent on certain performance milestones. In a separate move, Ares also announced the acquisition of Walton Street Mexico, a transaction that is anticipated to enhance Ares Management's portfolio with approximately $2 billion in industrial real estate assets.
These acquisitions are expected to be beneficial to Ares' earnings and reflect the company's ongoing growth in the real estate sector. TD Cowen maintained a bullish stance on Ares, reiterating a Buy rating, while CFRA raised its price target for Ares to $170, reflecting a positive outlook based on the expanding private credit market. However, Redburn-Atlantic initiated coverage on Ares Management with a Neutral rating.
Ares Management's recent developments also include an 18% year-over-year increase in total assets under management, reaching $447.2 billion in the second quarter of 2024, and a 21% increase in its third-quarter common dividend. The National Football League has approved Ares Management, among other private equity firms, to acquire up to 10% stakes in its teams. These developments indicate a robust growth trajectory for the company.
InvestingPro Insights
As Ares Management Corporation (NYSE:ARES) prepares for this significant acquisition, InvestingPro data provides additional context to the company's financial position and market performance.
Ares currently boasts a market capitalization of $50.25 billion, reflecting its substantial presence in the alternative investment management sector. The company's strong market position is further evidenced by its trading near its 52-week high, with the stock price at 99.38% of its peak.
Investors should note that Ares has demonstrated impressive returns, with a one-year price total return of 52.15% and a year-to-date return of 37.77%. This performance aligns with the company's strategic growth initiatives, including the announced acquisition of GCP International.
An InvestingPro Tip highlights that Ares has raised its dividend for 4 consecutive years, which may appeal to income-focused investors. The current dividend yield stands at 2.32%, with a notable dividend growth of 20.78% over the last twelve months.
However, it's important to consider that Ares is trading at a high P/E ratio of 80.96, which is significantly above industry averages. This valuation metric suggests that investors have high growth expectations for the company, possibly factoring in the potential benefits of the GCP International acquisition.
For readers interested in a more comprehensive analysis, InvestingPro offers 13 additional tips for Ares Management Corporation, providing a deeper understanding of the company's financial health and market position.
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