Ares Management, Sumitomo Mitsui Financial Group and Sumitomo Mitsui Banking (SMBC Group) reached a strategic agreement to collaborate on future business opportunities. As part of this agreement, SMBC Group will make a $384 million equity investment in the publicly traded shares of Class A common stock of Ares.
Together, Ares and SMBC Group plan to collaborate across three areas, including:
- Strategic Distribution: Ares and SMBC Group plan to enter into a strategic distribution agreement to market Ares’ investment products to SMBC’s clients in the Japanese market.
- Accretive Investment Opportunities: SMBC Group will utilize its capital to make investments that will support the launch of certain new businesses and accelerate the advancement of certain existing platforms across Ares with a particular focus on the private credit markets.
- Capital Markets Collaboration: Ares and SMBC Group will coordinate on certain capital markets financing activities in the U.S. and Asian leveraged finance markets.
“We have enjoyed a long and mutually beneficial relationship with SMBC Group and we are excited to enhance our already strong strategic collaboration,” Michael Arougheti, CEO and president of Ares, said. “We believe this partnership will empower both of our firms to further leverage our individual franchise strengths and will enable us to accelerate the growth of many new strategic business initiatives on a global scale.”
As part of this multi-faceted partnership, SMBC will purchase 12.1 million shares of Class A common stock from Ares at a price per share of $31.64 based on the volume weighted average price over the last 30 trading days prior to this announcement. Following the investment, SMBC will own a 4.9% equity stake in Ares Management and the co-founders, other employees of Ares and entities controlled by such persons will own approximately 61%, on a fully exchanged basis.
“We are pleased to enter into this strategic partnership to help accelerate the growth of our two businesses, and to enhance our clients’ global product needs in the attractively growing global alternative asset management industry,” Jun Ohta, president and group CEO of SMBC Group, and Masahiko Oshima, deputy president and executive officer of SMBC Group, said in a joint statement.
Ares intends to use the proceeds from SMBC’s $384 million direct investment for strategic growth initiatives, including funding additional growth capital for its insurance initiative, Aspida Financial, rolling out the aforementioned new investment products in the Japanese market in partnership with SMBC Group and taking advantage of opportunities presented by the current market dislocation.
“Beyond the growth opportunity that this partnership presents for both of our firms, the strategic investment by SMBC coupled with Ares’ existing strong balance sheet and liquidity position and our proven ability to grow through periods of extreme market dislocation provides an opportunity for our firms to jointly capitalize on compelling risk-adjusted investments in this period of market volatility,” Michael McFerran, chief operating officer and CFO of Ares, said.
Citi served as financial advisor and Skadden, Arps, Slate, Meagher & Flom served as legal advisor to SMBC Group. Goldman Sachs served as financial advisor and Kirkland & Ellis served as legal advisor to Ares.
Ares Management is an alternative investment manager operating three integrated businesses across credit, private equity and real estate.
SMBC Group is a financial institution headquartered in Japan.