Ares Management Corp has launched a new $500m special purpose acquisition company (SPAC), Ares Acquisition Corp. II, becoming the first large blank-check firm to emerge after more than a year of mostly smaller offerings; and with two years to find and complete a deal, it has more time on its hands than most of its big SPAC peers. The offering has been underwritten by Citigroup and UBS, marking a return of both big banks and a reputable sponsor to the table.
Ladies and gentlemen, gather ’round, for we have a newborn giant entering the world of blank checks. Ares Management Corp., the proud parent of this jumbo-sized special purpose acquisition company (SPAC), has given birth to a whopping $500 million baby, known as Ares Acquisition Corp. II. This marks the first mammoth blank check firm to emerge after more than a year of mostly puny offerings, like an oasis in the desert for parched investors.
Now, you may recall that last year was quite the roller coaster for SPACs. More than 600 of these financial Frankensteins raised a mind-numbing $163 billion in 2021. Compare that to the measly 13 SPACs in the current year, with sponsors raising a median of just $69 million. It seems Ares Acquisition Corp. II is stepping into the ring at just the right time, flexing its muscles amidst a sea of smaller contenders.
As traditional IPOs have been on a hiatus, blank checks have managed to raise nearly $1.5 billion in 2023. SilverBox Capital, for instance, raised an upsized $138 million for its third SPAC, SilverBox Corp. III, in February, as sponsors dip their toes into smaller pools of money. This leaves the door wide open for jumbo SPACs like Ares Acquisition Corp. II to swoop in and seize opportunities when the IPO jitters subside.
According to Jonathan Browne, a senior investment analyst at RiverNorth Capital Management, this might be an interesting opportunity for a behemoth like Ares Acquisition Corp. II, which could have less competition when pursuing larger target companies. It’s like watching a heavyweight wrestler in a ring of featherweights – there won’t be much left standing after Ares Acquisition Corp. II is done.
In an interesting twist of fate, Ares’ first SPAC – a $1 billion behemoth – managed to strike a deal to take nuclear power technology firm X Energy Reactor Co. public in December, just months before its deadline. More than half of its investors swapped their shares for cash when the SPAC was given an additional six months, like an early Christmas present.
As for its new SPAC, units have already risen 1.2% to $10.12 since debuting late last month. Warrants, those delightful deal sweeteners that dangle the prospect of extra windfalls for SPAC bettors, have fizzled for most blank checks and now trade at a fraction of their worth a year ago. Ares Acquisition Corp. II, however, is still enjoying the sweet taste of success.
With two years to find and complete a deal, Ares Acquisition Corp. II has much more time on its hands than most of its big SPAC peers. In these uncertain times, sponsors are broadening their horizons for potential targets. As we speak, nearly 200 SPACs with almost $47 billion in trust are frantically seeking tie-ups before deadlines loom.
The Ares offering has been underwritten by Citigroup Inc. and UBS AG, marking a return of both big banks and a reputable sponsor to the table. While the SPAC environment may seem lackluster at the moment, some industry watchers expect this venture to be a successful one. As Jay Ritter, a professor of finance at the University of Florida, put it, “it’s also a gamble by the sponsors as to whether there is a continued negative sentiment toward SPACs.”
So, there you have it, folks. Ares Acquisition Corp. II has burst onto the scene, ready to prove that the SPAC industry is alive and well, despite the clouds of negative sentiment. With nearly 200 SPACs seeking almost $47 billion of trust before deadlines in the next six months, Ares’ offering has arrived at the perfect time. We eagerly await the future of this pioneering SPAC service, as it charts a course through uncharted waters for the industry.