8-KMaterial AgreementsExhibits & Filings

Ares Management Corp 8-K Report, Material Agreement (May 23, 2016)

Filed May 23, 2016For Securities:ARESARES-PB

Summary

This 8-K filing from Ares Management Corp. (ARES) on May 23, 2016, details a significant transaction support and fee waiver agreement between Ares Capital Management LLC (ACM LLC), a subsidiary, and Ares Capital Corporation (ARCC). This agreement is in direct support of ARCC's proposed acquisition of American Capital, Ltd. (ACAP). The key financial commitment from ACM LLC involves providing $275 million in cash consideration towards the acquisition. Additionally, ACM LLC has agreed to waive certain performance fees (Part I Fees) for ARCC for up to ten calendar quarters following the transaction's closing, capped at $10 million per quarter. This proactive financial support from Ares Management aims to facilitate the successful integration of ACAP into ARCC, creating a combined entity with substantial pro forma investments.

Key Highlights

  • 1Ares Capital Management LLC (ACM LLC), a subsidiary of Ares Management, entered into a Transaction Support and Fee Waiver Agreement with Ares Capital Corporation (ARCC).
  • 2The agreement supports ARCC's proposed acquisition of American Capital, Ltd. (ACAP).
  • 3ACM LLC will provide $275 million in cash consideration for the acquisition of ACAP.
  • 4ACM LLC will waive up to $10 million per quarter in Part I Fees (performance fees) for ARCC for the first ten calendar quarters post-closing.
  • 5The combined ARCC-ACAP entity is projected to have over $13 billion in pro forma investments at fair value.
  • 6American Capital has already monetized approximately $700 million in balance sheet investments since March 31, 2016, to reduce debt or hold cash.

Frequently Asked Questions

The primary purpose of this 8-K filing is to announce and detail a material definitive agreement, specifically a Transaction Support and Fee Waiver Agreement, related to Ares Capital Corporation's (ARCC) proposed acquisition of American Capital, Ltd. (ACAP).

Ares Capital Management LLC (ACM LLC), a subsidiary, is committing $275 million in cash towards the acquisition of American Capital. Furthermore, ACM LLC will waive certain performance fees payable by ARCC for up to ten quarters following the transaction's close, with a cap of $10 million per quarter.

The merger of ARCC and American Capital is expected to create a significantly larger entity. Pro forma for the transaction, the combined company would have had in excess of $13 billion in investments at fair value as of March 31, 2016.

The transaction is subject to several conditions, including approvals from American Capital and ARCC shareholders, customary regulatory approvals, and other closing conditions. It is also contingent on the successful sale of American Capital Mortgage Management, LLC to American Capital Agency Corp.