Shares of Ares Management dropped 6.4% in extended trading on April 5 as the alternative investment management company announced a 9.5 million offering of the company’s Class A shares with a par value of $0.01 per share. The company expects to grant the underwriters an option to buy up to 1.43 million additional shares of Class A common stock.
Simultaneously, Ares Management (ARES) also entered into a private placement agreement with its existing shareholder, Sumitomo Mitsui Banking Corporation to acquire $250 million of ARES common stock (consisting of a number of shares of non-voting common stock and a number of shares of Class A common stock to be determined by Sumitomo).
The stock will be acquired at a price per share that will be equal to the price of the public offering less underwriting discounts and commissions.
Ares intends to use the net proceeds from the offering and the private placement of shares for the payment of the cash consideration in relation to the acquisition of Landmark Partners and its subsidiaries and for general corporate purposes.
Late last month, Ares announced the acquisition of Landmark Partners for $1.08 billion including $787 million in cash and around $293 million in Ares Operating Group Units. (See Ares Management Corp stock analysis on TipRanks)
Last week, Oppenheimer analyst Chris Kotowski assigned a Hold rating to the stock. Kotowski commented on the proposed acquisition of Landmark, “Strategically, we believe the deal makes sense in that it adds an established capability with $19B in AUM [assets under management] as a new, nicely growing vertical.”
“Thus, it both diversifies ARES and gives it enhanced exposure to a new growth avenue. On the call, management also cited a relatively limited degree of overlap in the LP [limited partnership] base, creating some opportunities for fundraising synergies,” Kotowski added.
The rest of the Street is cautiously optimistic about the stock with a Moderate Buy consensus rating. That’s based on 5 analysts suggesting a Buy and 3 analysts recommending a Hold. The average analyst price target of $57.57 implies around 2.6% downside potential to current levels.
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