Blackstone Tops Lone Star Offer with JPY 250B Bid for Japanese Hotel Firm

Blackstone has improved its bid for a Japanese hotelier and property developer to JPY 205 billion ($1.85 billion), as the US private equity giant tops an existing offer by rival Lone Star Funds that values the company at JPY 195 billion.

Blackstone said in a statement yesterday that the company is offering to buy all of Unizo Holdings’ common shares at JPY 6,000 each – five percent higher than Lone Star’s bid of JPY 5,700.

The improved offer for the Japanese firm and its JPY 694 billion in office and hotel assets comes just over two weeks after Unizo on 9 February recommended that shareholders accept Lone Star’s bid.

Blackstone Eyes Japanese Prize

“Blackstone believes that the Revised Blackstone Offer offers the best option, not only for Unizo’s shareholders, who will be allowed to maximize the value of their shares, but also for all Unizo employees, who will benefit from the enhanced corporate value that will be achieved by Blackstone’s stewardship and development of Unizo as a well-capitalized and sustainable real estate platform,” Blackstone said in a statement.

The private equity giant headed by financier Stephen Schwarzman has sweetened its offer just four days before Dallas-based Lone Star’s proposal is due to expire.

Blackstone’s revised offer improves on the company’s 28 January bid of JPY 5,600 per share, as well as topping by 15 percent a bid from Softbank-backed US buyout firm Fortress Investment at JPY 5,200 per share.

Calming Shareholder Nerves

To ease shareholder concerns over its intentions for the future direction of the property firm, Blackstone said that it had signed and submitted to Unizo a binding agreement setting out the company’s commitment to maintaining or improving working conditions for the hotelier’s employees, as well as granting the existing team the opportunity to acquire shares in Unizo and secure a minority representation on the company’s board.

Blackstone noted that these benefits are not currently afforded to Unizo employees, and are not part of Lone Star’s offer.

These concessions follow Unizo’s 9 February investor presentation in support of Lone Star’s offer, which saw the Japanese hotelier recommending shareholders accept the offer not only on the grounds that Lone Star’s bid was the highest by price but because it additionally assured “continuity of business management”.

Unizo told shareholders that it opposed both the Blackstone and Fortress takeover bids on the basis that they do not guarantee against a future restructuring of the company.

US Giants Face Off in Japan

Blackstone, Fortress and Lone Star have been circling the Tokyo-listed real estate firm after a takeover bid by Japanese travel agency HIS Holdings was rejected by shareholders last July.

Three months after that takeover bid lapsed, activist investor Elliott Management – which is Unizo’s largest shareholder with a 13 percent stake – raised concerns over a potential conflict of interest in the board’s handling of takeover bids.

In an open letter published in October, Elliott, which is headed by US billionaire Paul Singer, indicated that Unizo’s demand that any takeover must allow for the company to be employee-controlled could be used to entrench current management.

According to Unizo’s most recent annual report, the company’s office portfolio, which consists of 68 properties in Japan and 11 properties in the US, contributes 77 percent to the company’s revenue. Unizo’s hotel portfolio, which makes up 23 percent of the company’s revenue, is made up of 24 hotels across Japan under the Hotel Unizo, Unizo Inn, and Unizo Inn Express brands.

Taking Aim at Japanese Assets

Blackstone is pursuing its interest in Unizo as it continues to bulk up its real estate holdings in Japan.

Just under three weeks ago, the firm signed an agreement to buy a portfolio of Japanese rental apartments from troubled mainland insurer Anbang Insurance for JPY 300 billion in what would be the largest property deal ever in Japan.

The agreement will see Blackstone take back possession from Anbang 221 rental apartments that it had sold to the mainland insurer three years ago for around JPY 260 billion, according to a source close to the deal who spoke to Mingtiandi.

During 2019, Blackstone focused on Japan’s logistics sector, including acquiring a set of Japanese warehouse facilities from Mapletree’s MJLD fund for around JPY 100 billion in July last year.