The companies said on Monday that as part of the deal American Capital (ACAS) will jettison American Capital Mortgage Management in a $562 million sale to American Capital Agency. Together, Ares (ARCC) and American Capital will have over $13 billion of investments.
Ares Capital has valued American Capital at $17.40 per diluted share, marking an 11.4% premium over Friday's closing price. American Capital is a publicly traded private equity firm, which originates and underwrites investments in other private equity, real estate and structured investments.
Activist investor Elliott Management Corp ha been putting intense pressure on American Capital for its performance and its plan to invest some assets into a new business development company (BDC).
BDCs are closed-end investment funds that lend mainly to privately owned mid-sized businesses. It is to be noted that the biggest BDC in the United States by assets while American Capital has a large asset management business.
Elliott Management owns 14.4 percent of American Capital. It has backed the Ares deal. Ares Capital shares shut down 2.4 percent at $14.83, while American Capital shares were gained 0.6 percent to close at $15.72.
"We view the deal as very positive for both," Sun Trust Robinson analysts wrote in client note. "Ares finds another avenue to grow its leading middle market lending franchise ... while Ares gains another $4 billion of (assets under management)."
Ares Capital was advised by Wells Fargo Securities and Bank of America Merrill Lynch, while Goldman Sachs and Credit Suisse Securities LLC advised American Capital.