New York-listed Ares Management Corp is acquiring a controlling stake in Hong Kong-based alternative asset manager SSG Capital Holdings Ltd as part of a strategy to expand in Asia.
Ares didn’t disclose financial details of the deal, saying only that the transaction will primarily comprise of Class A shares subject to a multi-year lock-up and a cash component.
The transaction is likely to close in the second or third quarter of 2020 and is subject to customary closing conditions, including regulatory approvals.
The transaction is expected to be minimally accretive in year one and a more meaningful driver of growth to after-tax realised income in the second year and beyond. Ares may acquire full ownership of SSG in certain circumstances under a contractual arrangement that may be initiated by Ares or equity holders of SSG.
"This transaction significantly builds upon our established Asian presence and will serve as a foundation for our future expansion," said Eric Vimont, partner at Ares. "The region is the largest and fastest growing global market that we believe is characterised by structural market inefficiencies that are driving the capital needs for the underserved middle market."
Ares operates three integrated businesses across credit, private equity and real estate. Its global platform had $144 billion of assets under management as on September 30, 2019 with approximately 1,200 employees in over 20 offices in more than 10 countries.
On the other hand, SSG that managed assets worth about $6.2 billion as on September 30, 2019 focuses on credit and special situation investments. The firm was formed in 2009 by former Lehman Brothers executives Edwin Wong, Shyam Maheshwari and Andreas Vourloumis.
Supported by a global, institutional investor base, SSG is regarded as one of the top investment firms in Asia with numerous industry distinctions and accolades for its lending and distressed activities. The firm has made investments across various market cycles, transaction types and Asian countries, including India, Indonesia, China and Thailand.
Late last year, SSG reportedly closed its fifth special situations fund at $2.7 billion. It raised $1.2 billion for its fourth special situations fund in 2017.
SSG is a majority shareholder in Assets Care Reconstruction Enterprise in India.
The firm's local access in developing markets in Asia could enhance Ares's horizons to manage specialised debt. This will help Ares compete with its private equity peers such as Blackstone which bought an asset reconstruction company in India, Apollo Global Management which has tied up with India's ICICI Ventures, KKR and Baring Private Equity Asia.
Bain Capital Credit India and Piramal Enterprises also have a joint stressed assets platform India Resurgence Fund.
In 2018, US-based Avenue Capital had picked up a 27% stake in Asset Reconstruction Company (India) Ltd or ARCIL while special situations investor AION Capital formed as a joint venture of Apollo Global Management and ICICI Venture.
In August last year, the Kotak Special Situations Fund hit the final close at $1 billion.
Global giants as well as local players have seen potential in India's distressed assets space as Indian banks grapple with over Rs 10 trillion ($140 billion) in bad debt.