Ares Sells a Piece of Itself

Three weeks ago, peHUB broke news that Ares Management was in the process of selling part of its management company via a private placement. Now it’s done.

The Los Angeles-based firm announced today that it has sold a minority ownership position to an undisclosed overseas investor for $375 million. No additional terms were disclosed, but we hear the deal values Ares at between $1.8 billion and $2.5 billion (15%-20% stake). This compares to the $5.5 billion valuation Oaktree got last week – and both could be used as third-party benchmarks if the firms decide to follow Blackstone into the public market…

One big difference between the Ares and Oaktree deals – besides valuation and the latter’s use of a new Goldman Sachs trading platform – is that Ares is not using any of its proceeds to pay back existing owners (i.e., founder liquidity). Instead, it is all being put toward growth initiatives, which will be used as principal capital for Ares funds in existing business lines, to create additional business lines and to help hire additional staff.

Ares manages several private equity and debt funds, plus a publicly-traded business development company called Ares Capital Corp. (Nasdaq: ARCC). Its first private equity fund had called down approximately 80% with a 27.1% IRR through the end of Q3 2006, according to investor CalPERS. Its second private equity fund closed just last year, and only had called down around 10% of its capital through the CalPERS reporting period.