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MarketScreener Homepage  >  Equities  >  Nyse  >  Ares Management Corp    ARES

ARES MANAGEMENT CORP

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Blackstone to switch from a partnership to a corporation

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04/18/2019 | 08:23am EDT
The ticker and trading information for Blackstone Group is displayed at the post where it is traded on the floor of the New York Stock Exchange

NEW YORK (Reuters) - Blackstone Group LP, the world's largest manager of alternative assets such as private equity and real estate, said on Thursday it would convert from a partnership to a corporation, in a bid to get more investors into its stock.

Blackstone is hoping the move, which will take effect July 1, will boost its share price, which has traded at a discount to traditional asset managers such as BlackRock Inc for more than a decade.

Under the so-called C-Corp structure, Blackstone will pay corporate taxes on all its revenue, in exchange for enabling investors such as mutual funds and index trackers to buy the stock.

The additional tax burden has become less severe after the headline U.S. corporate tax rate was lowered effective last year to 21 percent from 35 percent.

Two other private equity firms, KKR & Co Inc and Ares Management Corp, announced last year they would also make the switch.

Passive investors such as mutual funds, which are becoming more important as they manage more money, are restricted by their mandates from acquiring the stock of publicly listed partnerships.

Private equity firms pay corporate taxes under the partnership structure on the management fees charged to investors, but are mostly shielded from paying these taxes on performance fees.

Blackstone said the expanded investor base was worth what it called a "modest" tax hit.

"We believe the decision to convert will make it significantly easier for both domestic and international investors to own our stock and should drive greater value for all of our shareholders over time," Blackstone Chief Executive Stephen Schwarzman said in a statement.

Blackstone also announced first-quarter earnings on Thursday, reporting distributable earnings - the actual cash available for paying dividends - of $538 million (£414 million) in the first quarter, up from $502 million a year earlier.

This translated to distributable earnings per share of 41 cents, lower than the 51 cents analysts had predicted on average based on Refinitiv data.

Nevertheless, the announcement of the switch to a corporation sent Blackstone shares surging about 10 percent in premarket trading to $39.20.

"We believe this will unlock value, as the partnership structure made it too difficult for many of our long-only clients, and major indexes, to own," Credit Suisse analysts wrote in a research note.

Fee-related earnings, the amount Blackstone earns from management fees, were up 11 percent year-on-year at $374 million.

Blackstone said its assets under management reached $512 billion at the end of March, up 14 percent from a year ago.

Blackstone declared a first-quarter dividend of 37 cents per share.

(Reporting by Greg Roumeliotis in New York; Editing by Bernadette Baum)

By Greg Roumeliotis

Stocks mentioned in the article
ChangeLast1st jan.
ARES MANAGEMENT CORP -1.06% 28.13 Delayed Quote.29.51%
BLACKROCK INC -0.40% 473.24 Delayed Quote.20.47%
VALUE8 2.51% 5.72 Delayed Quote.20.68%
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Financials (USD)
Sales 2019 1 235 M
EBIT 2019 450 M
Net income 2019 162 M
Debt 2019 5 938 M
Yield 2019 4,55%
P/E ratio 2019 18,3x
P/E ratio 2020 14,7x
EV / Sales2019 7,16x
EV / Sales2020 5,72x
Capitalization 2 907 M
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Mean consensus BUY
Number of Analysts 11
Average target price 29,91  $
Last Close Price 28,13  $
Spread / Highest target 20,9%
Spread / Average Target 6,32%
Spread / Lowest Target -7,57%
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Managers
NameTitle
Michael J. Arougheti President, Chief Executive Officer & Director
Antony Peter Ressler Executive Chairman
Michael Robert McFerran Chief Operating & Financial Officer & Partner
Ann Yee-Kono Chief Information & Risk Officer, Partner
Sandesh Hegde Chief Technology Officer & Managing Director
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