US alternative investment manager Ares Management Corporation has agreed to buy a controlling stake in AMP Capital’s private markets business.

The joint venture proposal came after Ares abandoned its original offer to acquire the entire AMP group for around A$6.35bn (€4.1bn).

The parties have agreed to form a A$2.25bn joint venture to run the Australian company’s infrastructure equity and debt, real estate and other minority investments.

Under the proposed transaction, with a 60% stake in the business, Ares will assume management control of AMP Capital. Ares will outlay equity totalling A$1.35bn for its stake, and AMP will own the remaining 40% interest in the joint venture. AMP would retain around A$900m of assets, mostly seed, sponsor and related investors. 

The deal, which is subject to approvals, gives an implied value to AMP Capital’s existing private markets business of up to A$3.15bn.

“We have a lot of details to go through, and our collective teams are working towards a binding agreement over the next 30 days (of exclusivity),” said Francesco De Ferrari, AMP’s chief executive officer.

“The strategic rationale,” he said, “is to pivot AMP Capital towards private markets to what we call once-in-a-lifetime opportunity that exists within these asset classes.

“Low interest, huge government intervention, and basically a lot of macro trends support these businesses,” he said told journalists at a media briefing.

Ares chief executive, Michael Arougheti, said the partnership would expand Ares’ real estate and infrastructure investment capabilities.

“We believe we can add significant value through our global scale, relationship network, investor relationships and our broad, collaborative investment platform,” said Arougheti.

The joint venture is expected to raise A$500m of debt to maximise capital efficiency. This would reduce the pro-rata equity contributions for each party in the joint venture.

Under this assumption, said the partners, Ares would fund A$1.05bn in equity to the joint venture and AMP would receive expected gross cash proceeds of up to A$1.55bn.

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