Ares Acquisition Corp., X-energy scrap $1.8B merger due to 'persistently volatile public markets'

By Steve Gelsi

Ares Acquisition Corp. and X-energy Reactor Company LLC on Tuesday called off their $1.8 billion merger deal due partly to challenging market conditions.

A shareholder meeting Tuesday to vote on the business combination is being postponed indefinitely.

Ares Acquisition Corp. (AAC), which is a special purpose acquisition company affiliated with Ares Management Corp. (ARES), will liquidate. It's the 165th special purpose acquisition company (SPAC) to dissolve this year, according to SPAC Research.

Ares Acquisition Corp. has a market capitalization of just under $700 million, which will be returned to shareholders.

X-energy will continue as a private company with an undisclosed investment from Ares Management Corp.

Jay Ritter, finance professor at University of Florida and an expert in initial public offerings, said SPAC acquisitions have been struggling partly because of a lack of available capital to deploy on deals.

SPAC acquisitions typically involve a PIPE deal, or a private investment in public equity, for financing. SPACS are usually required to buy a company within two years.

"A SPAC would have to negotiate very attractive terms with a merger partner in order to attract PIPE money and avoid redemptions on a big deal," Ritter said. "It is quite possible that it will never occur again."

In a statement, X-energy founder and executive chairman Kam Ghaffarian said, "Both X-energy and AAC recognize the challenges presented by the current financial market environment and the opportunity for X-energy to continue forward as a private company."

Ares Management Chief Executive David Kaplan said, "While the persistently volatile public market conditions over the course of 2023 have led to this mutual decision, we remain steadfast in our belief in X-energy's exceptional talent, differentiated nuclear technology and mission to deliver affordable, zero-carbon energy on a global scale."

While Ares Acquisition Corp. is liquidating, a few other big SPACs remain in the market shopping for deals including: Nabors Energy Transition Corp. II (NETD), which raised $305 million on July 14, Ares Acquisition Corp. II (AACT), which raised $500 million on April 21, and Gores Holdings IX Inc. (GHIX), which raised $525 million in January.

-Steve Gelsi

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10-31-23 1522ET

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