Ares Management Set to Go Public, Joining Rivals

The biggest private equity firms were widely known to investors by the time they first sold their shares to the public.

Now, a relatively unfamiliar but rapidly growing firm is poised to join the ranks of listed companies.

Ares Management, a private equity and debt investing firm based in Los Angeles, is expected to have its debut on the New York Stock Exchange on Friday, becoming the seventh major private equity firm to tap the public markets.

The initial public offering was priced conservatively Thursday evening, raising $216 million for Ares. A large shareholder, the Abu Dhabi Investment Authority, which had planned to sell shares, ultimately decided against it. The shares priced at $19 each, below an expected range of $21 to $23, according to a person briefed on the matter. At that $19 level, the company is valued at about $4 billion.

The offering casts the spotlight on a private equity billionaire. Antony P. Ressler, 53, the chief executive and co-founder of Ares, who once worked in high-yield bonds at the now-defunct firm Drexel Burnham Lambert, has a stake worth about $1.2 billion based on the I.P.O. price.

Ares is following an initial public offering path blazed in recent years by the likes of the Blackstone Group, Apollo Global Management, the Carlyle Group and Kohlberg Kravis Roberts.

Those firms — which spend much of their energy taking companies private to increase their value without the scrutiny of stock investors — made for somewhat counterintuitive debutantes on the public markets. But they have since used their publicly traded shares to help propel their growth.

For Ares, the stock offering is also an opportunity for branding. The firm was established in 1997 before spinning out from Apollo, a buyout and debt specialist to which Ares is often compared. The two firms have deep professional and personal ties: Mr. Ressler is a brother-in-law of Apollo’s chief executive, Leon D. Black.

But unlike Apollo, which regularly makes headlines for its multibillion-dollar deals, Ares tends to fly under the radar. In perhaps its most prominent deal recently, the firm teamed with a Canadian pension plan to buy the luxury retailer Neiman Marcus for $6 billion.

“They’re not a household name in the context of private equity,” said David Fann, the chief executive of TorreyCove Capital Partners, a firm that advises institutional investors in private equity. “They will be now.”

Ares’s market debut comes several years after a string of I.P.O.s by the giants of private equity. Blackstone, in a deal that drew the attention of Congress and helped start a debate over the tax treatment of private equity, sold its shares to the public in 2007, creating a windfall for its founders, Stephen A. Schwarzman and Peter G. Peterson. K.K.R. got a New York Stock Exchange listing in 2010, and Apollo and Carlyle followed.

Like those companies, Ares is similarly classifying itself as a publicly traded partnership, greatly reducing its tax bill. While Congress is not expected to change this tax treatment soon, the issue continues to raise eyebrows in Washington and was a focus of recently proposed legislation by Representative Dave Camp, a Michigan Republican.

Beyond politics, publicly traded private equity firms face a number of challenges. Their earnings tend to be uneven — dependent in large part on the firms’ abilities to sell their investments — and can be difficult for Wall Street analysts to value. Mr. Schwarzman recently complained in a conference call with analysts that Blackstone was trading at a lower multiple than BlackRock, a giant asset management firm that lacks a private equity arm.

The market for I.P.O.s, too, has been choppy. An exchange-traded fund created by Renaissance Capital that tracks the performance of recent I.P.O.s is down almost 2 percent so far this year. The Standard & Poor’s 500-stock index has climbed 2 percent during that time.

Big private equity firms have reaped large profits from selling their investments into buoyant markets, fueling a rise in their shares. Against a 30 percent increase in the S.&P. 500 last year, shares of Blackstone doubled, while Apollo’s stock rose more than 80 percent. This year, however, their shares have slumped.

Ares is smaller than these firms, with about $74 billion in assets under management. It is closer in size to Oaktree Capital Management, a public firm with about $86 billion in assets under management, and to the Fortress Investment Group, with $62.5 billion under management.

Ares, which includes businesses in real estate and direct lending, said its economic net income — a measure that includes unrealized investment gains — was $198 million last year, 29 percent lower than the previous year. But its distributable earnings, which show the cash it generated, rose 40 percent, to $228.6 million.

“You’re seeing a period of very strong availability in debt, coupled with a very strong, at least for now, capital markets moment,” said Breck N. Hancock, a partner at the law firm Goodwin Procter. “That certainly explains why this would be a good moment in time for their own I.P.O.”

To an unusual degree, Ares has also focused on lending directly to companies. This segment has grown to encompass $27 billion of the firm’s assets under management, dwarfing the $10 billion private equity business.

Firms like Ares, known as non-bank lenders, have been active especially in Europe, as banks have pulled out of certain markets. And they have also drawn controversy, gaining the nickname “shadow banks.”

“Nonbank lenders have effectively become the banks of today,” Michael J. Arougheti, a co-founder and the president of Ares, said in a recent CNBC interview. “I’ve never really thought that we were in the shadows.”