Ares to buy American Capital in $3.4b deal

Shareholders in NASDAQ-listed American Capital will receive $1.47 billion in cash and $1.68 billion in stock from ACC. Ares shareholders will own around 73.9% of the combined entity, with American Capital shareholders owning the remainder. The payout to American Capital shareholders equates to $14.95 per share, rising to $17.40 with the separate sale of the company's mortgage division for $562 million. This represents an 11.4% premium to the May 20 closing price.

The merged entity will have more than $13 billion in investments on a pro forma basis.

ACC focuses on debt and equity financing, and primarily provides senior secured loans and mezzanine debt to middle market companies, VC-backed businesses and power generation projects. It is managed by Ares Capital Management, a subsidiary of New York-listed Ares Management. The latter specializes in global credit, private equity and real estate, with approximately $94 billion in assets under management.

American Capital has $20 billion in assets, including those on its balance sheet and those managed by affiliate GPs. It provides financing for buyouts as well as investing directly in private and public companies. Some of its affiliates are listed, including the soon-to-be-sold American Capital Mortgage Investment and American Capital Agency Corp, while others are not.

Privately-held American Capital Energy & Infrastructure invests in power generation facilities, gas and power distribution and transmission networks, energy transportation assets, fuel production facilities, and related companies, mainly in developed markets. It seeks to invest $50-350 million in per transaction, but can consider larger opportunities.

In 2013, Abhay Pande, previously co-head of energy global banking in Asia for Citigroup, was appointed as the energy and infrastructure business' regional managing director.

American Capital has been under pressure from activist investor Elliott Management, which holds a 14.4% stake in the company, over performance issues and a plan to spin off certain assets into a closed-end new business development company (BDC). Ares is the largest BDC in the US. Elliott has said it will vote in favor of the Ares deal.

"The growing demand for capital from middle market borrowers has created the need for flexible capital providers like us to fill the financing gap as banks continue to retrench from the market," Michael Arougheti, co-chairman of Ares Capital, said in a statement. "We believe this transaction materially enhances our presence as a market leading direct lender with the size and scale to capitalize on the attractive competitive dynamics in the market today and for the foreseeable future."

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• Topics
• North America
• Infrastructure
• Financing
• USA
• American Capital
• M&A