The management and major shareholders of ARA Asset Management are joining with US private equity giant Warburg Pincus and China’s AVIC Trust in a bid to privatise the Singapore-listed investment manager, according to a statement today to the Singapore stock exchange.
ARA co-founder and CEO John Lim is joined in the buyout bid by key shareholders Straits Trading Company and Li Ka-shing’s Cheung Kong Property, as well as Warburg Pincus and AVIC Trust.
According to statements by ARA, the potential for accessing Chinese capital and business opportunities is a key factor in the privatisation move. AVIC Trust is the investment branch of a state-run mainland corporation, while Warburg Pincus has built an extensive network in China.
The investment consortium is offering S$1.78 in cash for each share of ARA, which values the manager of eight real estate investment trusts (REITs) and numerous property funds at S$1.775 billion ($1.28 billion).
The price offered by the buyout group is a 43.9 percent premium over the 12-month volume-weighted average price of ARA shares up through November 2nd. ARA’s shares closed at S$1.41 per share on Wednesday.
Finding More Capital in Greater China?
The buyout consortium presents the privatisation scheme as a way for ARA to become more nimble and to more easily reach pools of private capital via Warburg Pincus’ and AVIC Trust’s relationships.
“A deeper capital base well-positions ARA in executing its business strategies going forward, including tapping growth opportunities through the network of our new partners,” Lim commented in a statement.
The private approach may also be an opportunity for Lim and his teammates to leverage its new partners’ mainland connections. “Straits Trading welcomes Warburg Pincus and AVIC Trust as partners in ARA. Given their deep experience and wide network of business relationships in the China region, we believe they will create value and opportunities to support ARA’s future growth,” Chew Gek Khim, Executive Chairman of Straits Trading said.
AVIC Trust and Warburg Pincus had previously invested together in a nearly US$300 million investment in Shanghai-based apartment rental platform Mofang Apartments in April of this year.
Mainland Markets Already a Key Battlefield for ARA
ARA currently has more than S$29 billion ($21 billion) under management, with many of those assets located in mainland China and Hong Kong.
The company led the $2.96 billion buyout of Cheung Kong Properties’ Century Link complex in Shanghai by China Life last month, and ARA manages mainland-focused Hui Xian REIT.
Yao Jiangtao, Chairman of AVIC Trust. which operates as part of the Aviation Industry Corporation of China but focuses on property investment, also underlined the key role of mainland considerations in the privatisation deal. “By working with ARA shareholders and Warburg Pincus, we believe that AVIC Trust can help to grow ARA’s platform in China and open the doors for more future business opportunities in the country,” Yao said.
Should the buyout plan be approved, Warburg Pincus would be the largest shareholder in the privatised company, with a 30.7 stake. “We are excited to partner with Mr. Lim and ARA’s management team on this initiative and the opportunity to accelerate the Company’s growth by leveraging the combined capital markets capabilities of AVIC Trust and Warburg Pincus,” said Joseph Gagnon, Managing Director and Head of Real Estate for China and Southeast Asia at Warburg Pincus.
Next on ARA’s new list of shareholders would be Straits Trading at 21 percent and AVIC Trust at 20.5 percent. Lim and Cheung Kong would each hold 19.9 percent and 8 percent stakes respectively.