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Apollo to Acquire Majority Interest in ARC

Apollo Global Management (NYSE: APO) is purchasing a $378 million majority interest in AR Global Investments, a new company that will own the asset management business of Nicholas Schorsch’s AR Capital. Schorsch will serve on the board of directors and as a senior managing director of the new company.

In addition, Apollo is acquiring RCS Capital’s (NYSE: RCAP) wholesale distribution business for $25 million in cash, which will also become part of AR Global Investments. AR Capital currently manages approximately $19 billion of alternative assets across a variety of real estate investment trusts, business development companies, mutual funds and other partnerships.

Apollo has also entered into a strategic partnership with RCS’s retail advice business, Cetera Financial Group.

This news is the latest in the ongoing AR Capital saga following the disclosure last October of concealed accounting irregularities at a huge net lease real estate investment trust founded by Schorsch and his partners at AR Capital. A wave of C-suite resignations, including that of executive chairman Schorsch, followed the revelations, as did a deflation in the stock price.

AR Global will be governed by a newly created board of directors consisting of six Apollo representatives, one of whom will be appointed chairman, including co-founders Josh Harris and Marc Rowan, Anthony Civale (lead partner and chief operating officer of Apollo’s credit business), Stephanie Drescher (global head of business development and investor relationship management), Martin Kelly (chief financial officer) and John Suydam (chief legal officer). The four partners of AR Capital (Peter Budko, William Kahane, Nicholas Schorsch and Michael Weil) will also serve on the board. William Kahane, AR Capital’s co-founder and head of real estate investments, will serve as chief executive officer of AR Global until a search is concluded to hire a new chief executive officer, after which he will serve as chief investment officer of AR Global’s real estate activities.

The news shook the investment community and shares tumbled nearly 30 percent following the announcement. At the time of publication, RCAP stock closed down 1.75 to $4.25.