Having just recently agreed to a merger for its inaugural vehicle, Ares Management filed late Wednesday for a new US$400m SPAC IPO, proving at least one sponsor still views the blank check product as a viable funding tool.
Ares Acquisition II, the new SPAC, features an overfunded trust, like all IPOs in the current vintage, allowing it to take advantage of the past year’s surge in interest rates.
Ares plans to lend the SPAC US$4m to secure US$404m of funding in the trust, or US$10.10 per US$10.00 unit being sold to investors.
The fact that two-year Treasuries are currently yielding 4.1% may have encouraged the investment manager to file for the SPAC IPO now, given the two-year cut-off for when SPACs have to find a merger target – or return money to investors.
Ares II is structured with one-half warrant gearing. Combined with a relatively long investment horizon, this is a more aggressive structure than other recent SPAC IPOs.
Ares II is co-headed by Ares Management co-founders David Kaplan and Michael Arougheti.
Citigroup and UBS have signed on as joint books, which would make Ares II the first SPAC IPO by a bulge bracket firm since Credit Suisse (now to be absorbed by UBS) priced the Joe Reece-led US$120m SilverBox III late last month.
In December, Ares Acquisition I agreed to merge with small modular nuclear reactor maker X-energy in a transaction valued at US$2bn. Redemptions left it carrying US$443m of cash into the merger, well shy of the US$1bn raised from its IPO. Existing X-energy shareholders rolled in their equity for a 75% stake. Ares I shares are trading today at US$10.33.