Hillhouse Announces $1.1B Buyout Offer for Japan’s Samty Holdings

Hillhouse Investment Management, together with its Rava Partners real assets unit, late Friday announced a tender offer to buy out the common shares in Japanese developer Samty Holdings in a deal which values the company at JPY 169 billion ($1.13 billion).

The tender offer, which is being supported by Samty’s board, values the company’s shares at JPY 3,300 each and aims to take the developer private, according to a joint statement by Hillhouse and Rava. The offer represents a 14.1 percent premium to the developer’s highest ever share price, with the stock jumping nearly 18 percent on Friday to close at JPY 3,080 on the Tokyo stock exchange.

Hillhouse, which has taken a platform-driven approach to investment as it has expanded its real estate investments across Asia through Rava Partners, is positioning the bid as a way to bolster Samty’s existing capabilities while expanding its fund management business.

“We are excited about this strategic partnership and believe that our expertise, particularly in building asset management businesses, can help Samty Holdings reach its future goals,” said Hillhouse co-chief investment officer Michael Yi. “We look forward to collaborating with Samty Holdings’ exceptional management team to help strengthen their leadership in the Japanese market and drive long-term growth.”

Agreements in Place

The privatisation effort is supported by Samty Holdings’ largest shareholder, Daiwa Securities Group Inc, and by its Daiwa PI Partners affiliate, which together own 37.18 percent of Samty’s shares.

The Daiwa units have entered into a non-tendering cooperation agreement with Hillhouse to support the bid. Daiwa Securities Group is set to continue to be a shareholder in the company following the buyout.

“We are focused on bolstering our real estate asset management business to have more resilient and stable earnings that are less susceptible to external factors,” said Akihiko Ogino, president and CEO of Daiwa Securities Group. “This transaction is a pivotal step for Samty Holdings to shift its profit structure and business model from that of a traditional developer to a recurring model centered on stable income gains.”

Mitsubishi UFJ Morgan Stanley Securities Co., Ltd, is lead financial advisor for the transaction, while Deutsche Bank and JPMorgan Securities Japan are co-financial advisors.

Shifting to a Fund Manager Model

Follow closing of the tender, Hillhouse said it intends to support Samty Holdings by leveraging its own fundraising capabilities and global investor network to strengthen the Japanese company’s asset management business.

The deal also aims to improve Samty’s use of capital by establishing a series of development and core funds, implementing measures to optimise corporate value and governance, and by introducing strategic investment opportunities in Japan and overseas that will contribute to Samty Holdings’ long-term transformation.

Samty operates both a development and an investment properties division, as well as sponsoring Tokyo-listed REIT Samty Residential Investment Corporation. The company’s real estate solutions division follows a value-add investment approach of buying, renovating and leasing out existing properties.

The company’s hospitality division leases and operates hotels in around a dozen Japanese cities, with Samty also operating a real estate management business. Outside of Japan, the company operates in both Singapore and Vietnam.

In its most recent fiscal year ending in November 2023, Samty had net sales of JPY 198.7 billion, up 35 percent from 128.5 billion a year earlier. The company’s profit attributable to owners of the parent firm for the period was JYP 10.3 billion, down from JPY 10.9 billion in the preceding 12 months.

Established in 1982 and admitted to the Tokyo stock exchange’s prime market in 2022, Samty established a new listing on the bourse in June of this year after transitioning to a holding company structure.

Samty’s leadership described the Hillhouse-backed privatisation bid as a way to move to a business model focused on fee income rather than capital-intensive development.

“In order to further promote future sustainable growth, we intend to make a major shift in our business model,” said Yasuhiro Ogawa, CEO of Samty Holdings. “We hope to transition from a capital gains-dependent business model to one focused on sustainable income, utilizing strategic M&A to enhance and streamline Samty Holdings’ operations.”

Residential Focus

Among the company’s assets, Samty’s annual report lists 10 rental apartment buildings valued at JPY 5.7 billion, offices worth JPY 33.3 billion and JPY 894 million in hotel properties. The company’s leadership pointed to the tie-up with Hillhouse as enhancing its ability to profit from opportunities in Japan’s residential sector.

“With the Japanese housing sector booming, the company aims to strengthen its position in this field and expand its fund management business nationwide,” Ogawa said. “In particular, in the field of apartment buildings, we welcome Hillhouse’s expertise and financial support to move to the next stage of growth”

In September Samty Residential Investment Corporation announced that it had agreed to purchase a set of 10 residential buildings spread across seven Japanese cities from units of its sponsor at a total acquisition price of JPY 6.2 billion.

“Samty Holdings boasts a strong portfolio of high-quality multi-family residential and hotel properties along with a proven track record of developing and managing these assets,” said Hillhouse partner and Rava Partners co-head Joe Gagnon. “We are thrilled to support the company’s growth, drawing on our experience in transforming developers into asset managers.”