Overview

Ares Acquisition Corporation II is a blank check company formed on March 15, 2021 to complete a merger, acquisition, or similar business deal with one or more businesses. As of March 31, 2024, the company had $1.6 million in its operating bank account.

The company completed its initial public offering (IPO) on April 25, 2023, raising $500 million in gross proceeds by selling 50 million units at $10 per unit. The IPO gave the company until April 25, 2025 to complete a business combination. If unable to complete a deal in that time, Ares will redeem its public shares for cash held in trust.

Financial Performance

For the quarter ended March 31, 2024, Ares had net income of $6.4 million. This consisted of $6.8 million in investment income earned on the trust account, offset by $455,512 in general and administrative expenses.

The company has no operating revenues and expects to continue incurring costs related to identifying and executing an initial business deal. Trends like inflation, rising rates, and geopolitical instability could negatively impact the company’s ability to complete a business combination.

Liquidity and Capital Resources

As of March 31, 2024, Ares had $1.6 million in its operating bank account and working capital of $1.7 million. Liquidity needs so far have been met through sponsor contributions, promissory note proceeds, and private placement funds.

If unable to complete a business combination, mandatory liquidation of the trust account raises doubt about Ares’ ability to continue as a going concern. The company expects to receive financing from its sponsor to meet obligations until completing a deal or liquidating the trust.

Future Outlook

Ares continues working to identify and execute an initial business combination within the timeline required. Its sponsor or an affiliate may provide working capital loans to finance deal costs.

If a deal is not completed in time, the company will redeem public shares for cash held in trust, resulting in no redemption rights or liquidating distributions for warrant holders.

Expenses

Ares pays its sponsor a $16,667 monthly fee for administrative services. It also owes deferred fees of $17.5 million to its IPO underwriters and $3.5 million to an affiliate for consulting services, payable only if a business combination occurs.

Critical Accounting Estimates

Ares’ financial reporting requires estimates and judgments affecting assets, liabilities, revenues, and expenses. Key areas involve fair value of financial instruments and accrued expenses. Actual results could differ from these estimates.

Major estimates include the redemption value and temporary equity classification of redeemable Class A shares. Income and losses are shared pro rata between Class A and Class B shares.

Recent Developments

As an emerging growth company under the JOBS Act, Ares is delaying adoption of certain new/revised accounting standards and may rely on reduced executive compensation disclosure and other regulatory exemptions.

No changes in internal controls over financial reporting occurred during the quarter that materially affected, or are reasonably likely to affect, internal control.