Abu Dhabi’s Mubadala Investment Company is teaming with executives of Fortress Investment Group in a takeover of the US fund manager, having agreed to acquire the 90.01 percent stake in Fortress currently held by Japanese venture investor SoftBank.
“Fortress is a world-leading investment manager with a proven track record of delivering superior risk-adjusted returns to its investors throughout business cycles,” Mubadala Capital CEO and managing director Hani Barhoush said in a joint statement with Fortress. “Over the last 20 years, they have built an incredible franchise and established themselves as a premier credit and asset investor while simultaneously growing investment strategies across a wide range of asset classes.”
Financial terms of the deal were not disclosed, but the Financial Times had reported earlier this month that the parties were in advanced discussion at a valuation of $3 billion for the distressed debt specialist. Masayoshi Son’s SoftBank had paid $3.3 billion to acquire control of Fortress in 2017.
The agreement marks the second acquisition of a major debt fund manager in as many weeks, after TPG announced a deal on 15 May to acquire Angelo Gordon for $2.7 billion. With Bloomberg reporting on Tuesday that more than $190 billion in property bonds and loans worldwide are currently trading at distressed prices, fund managers have been scrambling for access to discounted assets.
Stamp of Approval
After the deal’s closing, Fortress’s management team is expected to own 30 percent of the company via a class of equity entitling it to appoint a majority of board seats, according to the announcement. The Emirati sovereign wealth fund’s Mubadala Capital arm — which now holds a 9.99 percent stake in Fortress through its Private Equity Funds II and III — will own 70 percent of Fortress equity upon completion.
Fortress, which had $45.8 billion in assets under management at the end of 2022, will continue operating under its existing brand, with Drew McKnight and Joshua Pack as co-CEOs and Pete Briger as chairman, while Barhoush will continue to serve on the board as he has since 2019.
“We have worked closely with Mubadala for years and have enormous respect for their investment acumen and discipline,” the Fortress management team said this week. “We view Mubadala’s further investment as an affirmation of the business model and investment approach we have embraced for more than 20 years, and — at a time when market dynamics are better aligned than ever before with our experience and expertise — we could not be more excited about the future of Fortress.”
The purchase of the 25-year-old company is expected to close in the first quarter of 2024, after which Dean Dakolias will continue in his role as managing partner and Tom Pulley will remain as CEO of the global Fortress Real Estate business. Fortress co-founders Wes Edens and Randy Nardone will continue to oversee permanent capital vehicles and remaining private equity investments.
Nikkei Asia reported last November that Fortress was preparing to buy Japan’s struggling Sogo & Seibu department store chains for JPY 200 billion ($1.38 billion) or more. Japanese appliance store operator Yodobashi Holdings was expected to invest in the deal by buying certain Sogo & Seibu sites and rerouting proceeds to Fortress, the news service said.
Fund Defies Headwinds
Mubadala’s investments in Asia Pacific real estate include a $350 million commitment to regional data centre firm Princeton Digital Group and financial backing for a A$1 billion Logos development venture in Australia. Mubadala has also been a key investor in JD Property, the real estate fund management division of mainland China e-commerce provider JD.com.
In an annual review released this month, the $276 billion sovereign fund said 2022 was one of its most active years on record, underscored by the execution of more than 650 transactions and the investment of $29.1 billion despite market volatility and macroeconomic headwinds.
“As a sovereign investor, we have a long-term investment horizon and institutional patience,” said Mubadala chief financial officer Carlos Obeid. “We continue to focus on our capital deployments in line with our strategy, supported by prudent management of our finances, underlining the strength of our business and investment approach.”
Mubadala Capital, the fund’s asset management subsidiary, oversees $20 billion across its own balance sheet investments and in third-party capital vehicles on behalf of institutional investors.