A CONSORTIUM of investors led by Starwood Capital Group, Sixth Street Partners and SSW Partners has made an offer to take Hong Kong-listed real estate fund manager ESR Group private at HK$13 a share in cash.
This is 55.7 per cent higher than the closing price of HK$8.35 a share on Apr 24, ESR’s last trading day prior to the submission of its non-binding proposal, said the consortium in a statement on Wednesday (Dec 4) evening. It is also nearly triple ESR’s unaudited net tangible asset value, which was about HK$4.35 as at Jun 30.
Shareholders who decide against exiting their investment may choose to roll their shares into EquityCo, an unlisted investment holding company incorporated in the Cayman Islands, to take part in the next phase of the company’s development alongside the consortium. Alternatively, they may choose a mix of the two options in a proportion of their choosing.
Overall, the proposed offer is valued at HK$55.2 billion (S$9.5 billion) on an equity value basis, making it the largest privatisation from the Hong Kong Stock Exchange since 2021.
In the statement, the consortium highlighted that the privatisation offer is both beneficial to ESR and attractive to its shareholders.
For one, a strategic transformation is required to realise the company’s platform value, it said. “To effectuate this transformation, the company needs to transition to an asset-light platform, re-focus on new-economy sectors, simplify its current portfolio with non-core asset divestitures, realise cost synergies and optimise its balance sheet.”
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Since these strategic initiatives may come with significant short-term earnings fluctuations, it believes that it is best executed in a private setting, in which “decision-making and execution related to this transition would be more flexible, efficient and unconstrained by listing rules”. It added: “The (proposed privatisation), if successful, would transform the company’s shareholder register to include highly experienced world-class investors whose long-term capital will support (its) strategic transformation and growth, while maintaining a prudent and effective governance structure that protects minority shareholders.”
As at the announcement date, the consortium holds 39.9 per cent of the company’s total issued shares, but will abstain from voting on the scheme. Besides the three investment companies, it also includes the sovereign wealth fund Qatar Investment Authority, private equity fund Warburg Pincus, and ESR co-founders Stuart Gibson, Charles de Portes and Jeffrey Shen.
The consortium has also received irrevocable undertakings in support of the privatisation from disinterested shareholders – including The Straits Trading Company and Japan’s Sumitomo Mitsui Banking Corp – representing around 51.2 per cent of shares. It noted that it has also received “co-investment equity commitments from highly reputable institutional investors”, who will invest in the company through Starwood Capital and Warburg Pincus-managed vehicles. These include Alpha Wave Ventures and a leading Asia public pension investor.
The privatisation will be financed through a combination of rollover of the consortium’s 39.9 per cent shareholding, additional equity capital from members of the consortium, external debt financing, and any shares rolled over by non-consortium members who elect to roll their shares into EquityCo, it noted.
ESR, which sponsors four real estate investment trusts in Singapore, has US$154 billion in assets under management. It focuses on real estate assets such as warehouses and data centres in markets including Australia, China, India, Japan, New Zealand, Singapore and South Korea.
