April 23 (Bloomberg) -- Tony Ressler is catching up with his billionaire brother-in-law Leon Black.
Ressler, who plans to raise as much as $419 million in an initial public offering of his credit and private-equity firm Ares Management LP three years after Black led Apollo Global Management LLC down the same path, will have a net worth of about $1.5 billion if the offering prices at the midpoint of the range, according to the Bloomberg Billionaires Index. Black’s personal wealth is valued at $6.2 billion.
Ressler, 53, the salt-and-pepper-haired husband of actress Jami Gertz and father of three, will own about 31 percent of the company following the IPO. Blackstone Group LP Chief Executive Officer Steve Schwarzman, Carlyle Group LP co-CEOs David Rubenstein and Bill Conway, Oaktree Capital Group LLC Chairman Howard Marks and KKR & Co.’s co-CEOs Henry Kravis and George Roberts have all taken their firms public in the past seven years, cementing their status among the wealthiest Americans.
“He’s had a game plan for a decade,” said Rich Lawson, the CEO of Palo Alto, California-based buyout firm HGGC LLC, which isn’t publicly traded. “He watched closely as other alternative-asset organizations went public and learned from them.”
Ares’s 700 employees oversee about $74 billion in offices in the U.S., Europe and Asia. The firm, based in Los Angeles, runs more than 140 active investment funds.
In the past 10 years, Ares has bought more than 20 companies, including luggage maker Samsonite Corp., vitamin maker GNC Holdings Inc., budget chain 99 Cents Only Stores and luxury retailer Neiman Marcus Inc., which it acquired in October for $6 billion in its largest-ever deal.
Ressler, a former Drexel Burnham Lambert Inc. banker who co-founded Ares in 1997 after working with Black at Apollo, contemplated a public offering for years, said two people with knowledge of the matter, who requested anonymity to discuss private conversations. He decided to wait until private-equity firms such as Carlyle and credit managers such as Oaktree showed success in the public markets, the people said.
Bill Mendel, a spokesman for Ares at Mendel Communications LLC, said Ressler declined to comment. Executives are limited by the U.S. Securities and Exchange Commission in their ability to speak publicly while regulators review their prospectuses.
Ressler, whose sister Debra is married to Apollo’s Black, has had a competitive streak since his upbringing on New York’s Long Island, where he played little-league baseball. He has remained humble in his competitiveness, said Jon Heyman, who went to school with Ressler at Lawrence High, a public school by John F. Kennedy International Airport, and has seen him in the years since.
“He was a big guy with glasses on the other team, and I was a little bit intimidated because of his size,” said Heyman. “I was pitcher and he hit two home runs against me. I distinctly remember the ball sailing right over my head.”
Ressler still enjoys baseball. In 2005, he and his brother Richard, the founder of Los Angeles-based investment firm CIM Group, became minority owners of the Milwaukee Brewers. And in 2012, Ressler was a finalist in bidding for the Los Angeles Dodgers, according to one of the people, eventually losing out to a group that included former basketball star Magic Johnson and several partners of investment firm Guggenheim Partners LLC.
“I now go to bed on ESPN’s top 10 plays of the day,” Gertz, who met Ressler in the mid-1980s when a mutual friend brought her to a party he hosted, told the hosts of American Broadcasting Cos.’s “The View” in 2012. “I used to get angry at my husband when we’d watch the game and then we’d have to watch ESPN right after the game. Now I get it: you miss the nuances of what happened.”
Ressler likes nuances. His success in investing is a result of a near-obsession with controlling downside credit risk in Ares’s deals, said Lawson.
“On every one of our calls, Tony was there, not his other guys,” Lawson said. “He’s got a very effective pair of eyes. He’s always taking a view of things from a credit standpoint and managing downside risk.”
Ressler also takes an active approach to his life outside of Ares’s glass-wrapped offices on the top floor of 2000 Avenue of the Stars, six miles east of the Pacific Ocean and six miles south of his home on a Beverly Hills hilltop. He’s a donor to both Democrats and Republicans, judging candidates individually, like his credit investments and private-equity deals.
He’s also a philanthropist, having co-founded Painted Turtle Camp for chronically ill children and co-chairing a group of Los Angeles charter schools, Alliance College-Ready Public Schools.
For Ressler, taking Ares public will solidify its status as a “have” company rather than a “have not” firm, a comparison he’s often made in front of colleagues and friends while increasing Ares’s assets to $74 billion, according to one of the people. To Ressler, a “have” investor has enough capital to take advantage of high-demand opportunities and is established enough to give clients confidence in its brand, the person said.
The billionaire wasn’t always in that position. The founding of Ares began with the collapse of Drexel, which in the 1980s pioneered the use of junk bonds as a financing tool for large-scale transactions such as leveraged buyouts. Drexel filed for bankruptcy in 1990 after Michael Milken, who ran the junk-bond department out of Beverly Hills, was indicted for securities violations as part of the biggest insider-trading scandal at that time.
Among the bond traders left in the dust were Ressler and John Kissick. Ressler, a Georgetown University and Columbia Business School graduate, was 29 years old and had been married to Gertz for just two years. Kissick, a Yale University and Stanford Graduate School of Business alumnus 19 years older than Ressler, had been a 15-year veteran of Drexel, having run corporate finance operations on the West Coast.
There were also Drexel’s mergers and acquisitions alumni, who included Black, Josh Harris and Marc Rowan. The three put together a private buyout group and named it Apollo Advisors, after the Greek god of sunlight and healing, and handpicked former Drexel colleagues in the process. Ressler and Kissick joined in the founding, and for the next seven years the duo financed companies as heads of the capital markets business.
With Black’s experience in dealmaking at Drexel, Apollo turned its focus to leveraged buyouts, or buying companies using large amounts of debt and selling them for a profit. By 1997, Ressler and Kissick saw the opportunity to strike out on their own and finance mid-sized companies using the capital markets group they had built. They chose the name Ares, for the Greek god of war, and completed the spinoff in 2001.
“A number of us wanted to focus on building our capital-markets business and a private-equity business focused on middle-market companies,” Ressler said in an interview last year with Pensions & Investments. “Since then, Apollo rebuilt its credit business; it is a fabulous firm.”
Ressler took Ares on a different path, deciding to first build a foundation of credit assets that produce stable income and pay predictable fees, rather than initially pursue volatile leveraged buyouts that pay off in lumpy intervals. In 2003, Ressler and his partners started investing a private-equity fund -- their first of what would become five buyout vehicles -- as a way to supplement their earnings from credit with takeovers that appeared attractive.
As of Dec. 31, 74 percent of Ares’s assets were in public and private credit strategies, with the remainder split between private equity and real estate.
“We used to think of Tony as somewhat sector-agnostic, but at the end of the day he’s actually a multi-industry specialist,” said HGGC’s Lawson, who has been an intermittent client of Ares since Ressler’s split from Apollo. “Having credit as an anchor and being able to come in and out of private equity as markets move is really going to help him as a public firm with public shareholders.”
Ressler’s net worth includes his $1.4 billion stake in Ares, calculated at the midpoint of the firm’s pricing range disclosed yesterday in an amended prospectus filed with the SEC. His ownership stake after the IPO assumes the over-allotment option isn’t exercised. The billionaire’s cash balance is based on an analysis of dividends, market performance, private transactions, taxes and charitable contributions.
Mendel, the Ares spokesman, declined to comment on the calculation.
Ares paid Ressler $15.5 million in 2013, mostly in performance fees earned for the firm’s fund returns, according to the prospectus filed with the SEC. He also received $123.1 million in distributions from his stake in the company.
Private-equity firms haven’t had an easy time in the public markets as investors have struggled to understand the business model and volatile earnings. Blackstone’s shares in December rose above the offering price of $31 for the first time since the firm’s public offering in 2007. Fortress Investment Group LLC, which also went public in 2007, is still trading more than 60 percent below its $18.50 offering price.
While observing the choppy ride publicly traded firms have had, Ressler seized on a theme benefiting the largest alternative-asset managers: dynamic allocation. As firms such as Blackstone, KKR and Carlyle grow, they have sought to become a one-stop shop for clients looking to allocate money to different strategies with varying risks. If successful, they’ll enter a “new phase of growth” in asset gathering, McKinsey & Co. said in a report this month.
“The simple answer to how an institution or an individual makes the 6 percent to 12 percent rates of return in today’s world in credit-related assets is not just lending to companies and to real estate,” Ressler told the audience at last year’s Milken Institute Global Conference in Beverly Hills, California. “It’s also allocating for the investor across many of these asset classes.”
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