Lone Star Funds has succeeded in its JPY 205 billion ($1.9 billion) takeover of Japanese hotelier and property company Unizo, triumphing over rivals Blackstone and Fortress Investment Group.
Unizo said in a statement yesterday that Lone Star’s JPY 6,000 per common share offer for the Tokyo-listed company had been accepted by 86.6 percent of shareholders.
Lone Star, which specialises in investing in distressed assets, has additionally secured an agreement with major shareholder Elliott International to acquire its 13 percent shareholding, according to the announcement.
The Japanese hotelier added that, once the share purchase had been completed, Unizo would be delisted from the Tokyo stock exchange.
Targeting a Distressed Prize
The victory for Lone Star is the culmination of a nine-month long battle for the troubled hotel and property group that is racing to stem losses after its net income for the first nine months of 2019 plunged to JPY 6.2 billion – down 61 percent from the JPY 16.5 billion it achieved for the same period a year earlier.
Unizo in February began marketing for sale JPY 130 billion of its JPY 694 billion in office and hotel assets as part of a capital recycling programme separate from the buyout plan, and has already sold at a discount a number of US properties it acquired during a $1 billion spending spree in 2016 and 2017.
Just last November, the firm sold the 685 Third Avenue office tower in New York to BentallGreenOak for a reported $400 million, taking a 17 percent hit after acquiring the 27-storey asset for $468 million in 2017.
Fighting Off Blackstone
The bidding war for Unizo had been ramping up since Blackstone entered the contest last October, with Lone Star forced to raise its bid just three weeks ago from JPY 5,700 per common to fend off its New York-based rival’s JPY 6,000 offer.
Despite earlier offers from US buyout firm Fortress Investment Group, in the closing stages of the contest, Blackstone had become Lone Star’s primary opponent after the firm headed by Stephen Schwarzman had entered the fray five months ago with an initial offer of JPY 5,000 per common share.
That bid had valued Unizo at JPY 171 billion – 17 percent less than Lone Star’s eventual winning bid.
Despite Blackstone sweetening its offer on several occasions, Unizo had favoured Lone Star’s bids on the grounds that the Dallas-based firm would be less likely to restructure the Japanese company.
Although Blackstone in February said that it had conditioned its offer on gaining the consent of Unizo’s board, the Japanese company’s management declined to support the proposal on the grounds that the fund manager had not provided clear proposals about how it would carry out a stock ownership scheme supported by Unizo.
Unizo Management Stays Safe
Unizo’s opposition to Blackstone’s offer had led Elliott Management to raise concerns over a potential conflict of interest in the board’s handling of the takeover bids.
In an open letter published in the same month as Blackstone’s October offer, Elliott – which is headed by US billionaire Paul Singer – indicated that the company’s management was trying to entrench itself.
Lone Star, along with Blackstone and Fortress Investment, had started to circle Unizo after a takeover bid by Japanese travel agency HIS Holdings was rejected by shareholders in July last year.