01—Abstract
Summary
Summary of the 8-K filed October 8, 2024. Cited figures are marked; the original filing is the authoritative source.
On October 4, 2024, Ares Management Corporation (ARES) signed a definitive agreement to acquire the international business of GLP Capital Partners (GCP International, excluding Greater China), plus existing capital commitments to certain managed funds.
Total initial consideration is approximately $3.7 billiona: about $1.8 billion in cash and about $1.9 billion in Class A common stock and RSUs, with the equity portion representing roughly 6% of Ares' outstanding Class A shares as of September 30, 2024. An additional earn-out of up to $1.5 billion, measured through the end of 2027 (with a possible six-month extension), is tied to growth in Japan and data center businesses, and Ares may pay up to 85% of it in stock. Strategically, the deal nearly doubles Ares Real Estate AUM to roughly $96 billion, adding GCP International's $44 billion of AUM (as of June 30, 2024), including nearly $20 billion in Japan industrial assets and a large data center development pipeline of over 1 GW of IT capacity.
Management expects the deal to be modestly accretive to after-tax realized income per share in the first full calendar year after closing, with meaningfully higher accretion in later years. Most of the consideration flows to GCP International management and employees in stock subject to long-term retention mechanisms, which supports leadership continuity.
Key risks for investors include the roughly $1.8 billionb cash requirement, which Ares plans to fund mainly with cash on hand and other debt or equity financing, with a $2.0 billion 364-day bridge facility as a backstop only if necessary; dilution from the stock issuance and potential earn-out shares; and execution risk in integrating a large international platform. The transaction is expected to close in the first half of 2025, subject to regulatory approvals and customary conditions.
02—Key points
Key Highlights
- Total initial consideration of about $3.7 billion: roughly $1.8 billion cash and $1.9 billion in Class A common stock and RSUs
- Equity issuance represents approximately 6% of Ares' Class A shares outstanding as of September 30, 2024, creating modest dilution
- Earn-out of up to $1.5 billion through end of 2027 (possible six-month extension), tied to Japan and data center growth; up to 85% payable in stock at Ares' option
- Nearly doubles Ares Real Estate AUM to approximately $96 billion, adding GCP International's $44 billion of AUM
- Management expects modest accretion to after-tax realized income per share in the first full calendar year post-closing, with greater accretion in later years
- Cash portion to be funded mainly from cash on hand and other financing, with a $2.0 billion 364-day bridge facility from Morgan Stanley and Citigroup as a backstop only
- Expected closing in the first half of 2025, subject to regulatory approvals and customary conditions
03—Questions
Frequently Asked Questions
How much will Ares pay for GCP International, and in what form?
The initial consideration is about $3.7 billion: approximately $1.8 billion in cash and approximately $1.9 billion in Class A common stock and restricted stock units, based on a volume-weighted average price calculated two business days before the transaction agreement, subject to adjustments. Up to $1.5 billion of additional earn-out may also be paid.
How dilutive is the stock component to existing Ares shareholders?
The shares and RSUs issued at closing are expected to represent about 6% of Ares' outstanding Class A common stock as of September 30, 2024. Additional dilution could occur if Ares pays earn-out consideration in stock, which can be up to 85% of the earn-out.
What does the earn-out depend on, and when is it payable?
The earn-out of up to $1.5 billion is measured through the end of 2027, with a possible six-month extension, and is payable upon achieving financial targets tied to growth in Japan and data center businesses.
How will Ares fund the cash portion of the deal?
Ares expects to use cash on hand and other equity or debt financing, which may come from capital markets transactions depending on market conditions. The $2.0 billion 364-day bridge facility from Morgan Stanley Senior Funding and Citigroup Global Markets would be used only to the extent necessary.
What is the strategic rationale and expected earnings impact?
The acquisition expands Ares Real Estate's scale and geographic reach, adding industrial and data center platforms in Japan, Europe, the U.S., Brazil and Vietnam, and creates a top-three global owner and operator of industrial assets. Ares expects modest accretion to after-tax realized income per share in the first full calendar year after closing, with meaningfully higher accretion in future years.
04—Continue