Sumitomo Mitsui Teams with ARA in $1.3B Buyout of Japan’s Kenedix

A unit of Japan’s Sumitomo Mitsui has launched a JPY 132 billion ($1.3 billion) takeover of one of the country’s most prominent real estate fund managers, and is teaming up with Singapore’s ARA Asset Management to get the buyout completed.

Sumitomo Mitsui Finance and Leasing Co is offering JPY 750 per share for Kenedix Inc, with the goal of acquiring a 70 percent stake in the Tokyo-listed fund manager, according to a joint statement by the leasing unit of Sumitomo Financial Group and Kenedix issued late on Friday.

ARA, which is currently the largest shareholder in Kenedix with a 20.27 percent holding, will be upping its stake in the manager of public REITs and private funds to 30 percent, according to the statement.

In a separate statement, Sumitomo Mitsui said that it intends to use the takeover as an opportunity to strengthen Kenedix’ REIT and private placement fund business, enhance the fund manager’s access to credit and other fund raising, and expand its business into new areas such as tokenised real estate securities.

Sumitomo Mitsui Targets Real Estate Funds

The takeover, which is offering existing shareholders a 14.5 percent premium over the Friday closing price of Kenedix’ stock, would give Sumitomo Mitsui control over a company which manages three Japan-listed REITs and has some JPY 2.5 trillion in assets under management.

In parallel with the advantages to Kenedix, Sumitomo Mitsui indicated that it can further expand its presence in the real estate business through the fund manager’s know-how, while enlarging its assets under management through Kenedix’ asset management business. Sumitomo Mitsui also indicated that it sees complementary relationships based on the asset class differences between its own operations and Kenedix’ listed J-REITs and private placement funds.

Sumitomo Mitsui’s buyout offer came after the Japanese financial giant had earlier invested in funds managed by Kenedix, including Kenedix Office Investment Corp, a REIT where Sumitomo Mitsui Trust Asset Management Co holds a nearly 5 percent stake.

As part of a shareholders’ agreement signed by Sumitomo Mitsui and Kenedix’ board, the buyer has agreed to keep Kenedix’ management in place following takeover. As part of the same deal, Kenedix CEO Taisuke Miyajima, and managing director Soushi Ikeda have agreed to stay on to helm the 25-year old company.

The proposed buyout arose out of discussions which reached a formal stage in June of this year, according to a joint statement by the two companies, with due diligence having been completed in October.

Sumitomo Mitsui Finance is a 50:50 joint venture between Sumitomo Mitsui Financial Group and Sumitomo Corp. In September the company announced that it had agreed to buy out Hitachi Capital Corp for JPY 294 billion.

ARA Expands in Japan

For ARA Asset Management, the expansion of its stake in Kenedix comes as Asia’s second-largest real estate fund manager continues to grow into more international markets.

With its business in Korea already managing a number of REITs, the Warburg Pincus-backed fund manager has been battling in recent months to complete a takeover of Australia’s Cromwell Property Group.

In taking over Kenedix, ARA and Sumitomo Mitsui are getting hold of a company which has played a prominent role in working with global fund managers investing in Japan.

In January the Tokyo-based firm teamed up with Nuveen Real Estate and the Netherlands’ Bouwinvest to purchase seven apartment buildings in Tokyo for $224 million. During that same month, Kenedix Office Investment Corporation purchased the Tosabori Prime office building in Osaka from an Invesco-managed fund for JPY 5 billion.

ARA had first bought into Kenedix in 2017, according to an earlier statement by the Singapore firm.