ESR Group Receives Offer to Go Private from Consortium of Investors
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.
Significant Premium Offered
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.
Valuation and Alternative Options
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.
Largest Privatisation from Hong Kong Stock Exchange since 2021
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.
Why the Consortium Believes the Privatisation is Beneficial
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.”
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”.
Funding and Ownership Structure
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.
ESR Group and Its Operations
ESR, which sponsors four real estate investment trusts in Singapore, has US$154 billion (S$207.3 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.
Conclusion
The proposed privatisation offer by the consortium of investors led by Starwood Capital Group, Sixth Street Partners, and SSW Partners is a significant development in the real estate sector, offering a premium of 55.7 per cent to ESR Group’s current share price. The consortium believes that the privatisation will enable the company to undergo a strategic transformation, which will benefit its shareholders and the company’s long-term growth.
FAQs
Q: What is the proposed privatisation offer for ESR Group?
A: The consortium is offering HK$13 a share in cash, which is 55.7 per cent higher than the current share price.
Q: What are the alternative options for shareholders who decide not to exit their investment?
A: Shareholders can choose to roll their shares into EquityCo, an unlisted investment holding company, or a mix of the two options in a proportion of their choosing.
Q: Why is the consortium offering a privatisation?
A: The consortium believes that a privatisation will enable ESR Group to undergo a strategic transformation, which will benefit its shareholders and the company’s long-term growth.
Q: What is the valuation of the proposed privatisation?
A: The proposed privatisation 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.
Q: Who are the members of the consortium?
A: The consortium is led by Starwood Capital Group, Sixth Street Partners, and SSW Partners, and 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.
