Blackstone Boosts Bid in Battle with Lone Star, Fortress for Japanese Hotelier

Blackstone has raised its bid for Unizo Holdings to JPY 192 billion ($1.76 billion), forcing fresh moves by rivals Lone Star Funds and Fortress Investment Group in the contest for the Tokyo-listed hotelier and real estate investment firm.

Blackstone said in a statement on 28 January that it had increased its offer for Unizo to JPY 5,600 per common share, up 12 percent from its October 2019 proposal of JPY 5,000 per share.

“Blackstone believes that the revised Blackstone offer is the best option for shareholders to maximize the value of their shares as well as the best means for enhancing Unizo’s corporate value, thereby providing benefits and opportunities for all relevant stakeholders,” the company explained in its offer notice.

US Private Equity Firms Bid for Japanese Prize

Blackstone’s sweetened bid for the Japanese firm and its JPY 694 billion in office and hotel assets represents a 10 percent premium over an existing offer by Lone Star of JPY 5,100 per common share, which has already received support from Unizo’s board.

The private equity giant headed by financier Stephen Schwarzman revised its proposal just days before a 4 February deadline set in Lone Star’s bid, with the Dallas-based private equity shop having since extended that schedule to 14 February.

The New York-based private equity giant has tried to calm shareholder concerns over Unizo’s lack of support for its bid, with Blackstone saying that it has conditioned its revised offer on gaining the consent of Unizo as a “consensual transaction is optimal for all parties and key to Blackstone’s core investment principles”.

Unizo had previously revealed in an investor presentation in October that Blackstone’s initial offer of JPY 5,000 per share had not satisfied its concerns over any future restructuring of the company or concerning the continuation of a proposed employee stock ownership scheme supported by the Japanese property group.

Lone Star Remains the Favourite

In response to Blackstone’s revised bid, US buyout firm Fortress Investment has upped its own competing offer for Unizo, offering JPY 5,200 per share for the Japanese property firm, according to a company announcement by Unizo.

That enhanced proposal is 27 percent higher than the JPY 4,100 the Softbank-backed company had offered in August, and surpasses the existing, preferred bid by Lone Star Funds of JPY 5,100 per share, while still falling short of the compensation offered by Blackstone.

Despite the pair of higher offers, Unizo has said in a statement that it continues to back Lone Star’s existing bid of JPY 175 billion for the company.

Big Players Circle Unizo

Blackstone, along with Lone Star and Fortress Investment, have been manoeuvring to buy Unizo after a takeover bid by Japanese travel agency HIS Holdings was rejected by shareholders in July last year.

In December, Unizo’s board recommended that shareholders accept what was then the highest bid for the company, Lone Star’s offer of JPY 5,100, noting in its recommendation that the US firm had agreed to keep the company in its current form.

That recommendation came two months after 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, questioned Unizo’s demand that any takeover allow for the company to be employee-controlled, and indicated that the condition could be used by the Japan’s current management to maintain their positions.

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.

Switching From Sheds to Commercial Property

Blackstone is making its bid for the office and hotel group after focusing most recently on Japan’s logistics sector.

Six months ago, the private equity giant bulked up its warehouse portfolio with the purchase of a set of Japanese logistics facilities from Mapletree fund MJLD for around JPY 100 billion.

That warehouse deal came three months before Blackstone agreed to sell a portfolio of rental apartment properties in Japan to Allianz Real Estate for €1.1 billion ($1.2 billion).