Sumitomo Mitsui Banking Corp. will make an equity investment in Ares Management Corp.'s publicly traded shares of class A common stock.
Ares will issue and sell to Sumitomo 12,130,540 shares of newly issued class A common stock for gross proceeds to the company of approximately $383.8 million before deducting offering expenses. The transaction is expected to close March 31. Following the investment, the Japanese company will own a 4.9% equity stake in Ares Management.
As part of the deal, Ares will market its investment products to Sumitomo's clients in the Japanese market. In addition, Sumitomo Mitsui Financial Group Inc. and Sumitomo Mitsui Banking will use their capital to make investments to 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. The companies will also coordinate on certain capital markets financing activities in the U.S. and Asian leveraged finance markets.
The agreement gives Sumitomo Mitsui Banking the right to appoint one nonvoting observer representative to attend meetings of Ares' board. If its economic ownership percentage reaches or tops 10%, it can designate one individual to Ares' board.
Ares intends to use the proceeds 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 and "taking advantage of opportunities presented by the current market dislocation."
Citi was financial adviser and Skadden Arps Slate Meagher & Flom LLP was legal adviser to the Sumitomo companies. Goldman Sachs & Co. LLC was financial adviser and Kirkland & Ellis LLP was legal adviser to Ares.