The acquisition of an alternative investment heavyweight such as Fortress assumes significance since it signifies a widening of SoftBank’s portfolio, which has typically catered to the technology and telecom sector.
With the SoftBank Group Corp preparing to launch the world’s biggest private equity fund, the company has acquired Fortress Investment Group LLC for around $3.3 billion.
The all-cash deal is SoftBank’s first major investment in an asset manager. The deal represents a widening of its gambit since the group has so far focused on technology and telecom sector.
The deal comes in the wake of SoftBank’s founder, Masayashi Son, surprise announcement of teaming up with Saudi Arabia to set up a $100 billion technology fund.
The acquisition of an alternative investment heavyweight could make sense for the group since it could help it move to financing investments with private equity cash instead of debt, said Gerhard Fasol, a consultant with Eurotechnology Japan.
“Son’s strategy appears to be to use Fortress’s know-how to move from debt financing to private equity. It’s a logical progression for the company,” said Fasol.
New York-listed asset manager, Fortress’s investments span hedge funds, real estates and private equity. As of September 2016, it had $70 billion in investments under its management. Fortress is one of the few global foreign investors who have targeted Japanese assets with its funds.
In a statement, SoftBank’s Son stated that the deal would “accelerate our SoftBank 2.0 transformation strategy of bold, disciplined investment and world-class execution to drive sustainable long-term growth”.
SoftBank executives were not available for comment on the deal.
Despite its diverse asset class ranging from bitcoins to timber, Fortress has failed to keep up with the growth in assets under management of its peers including Blackstone.
Both companies have stated that senior fund managers at Fortress will be retained and the company will now operate within SoftBank as an independent business.
As part of the deal, shareholders of Fortress will receive $8.08 per share, representing a premium of 38.6% to the closing price on February 13.
Fortress has stated it plans on sticking to its current base dividend of 9 cents per share for the fourth quarter of 2016.
Morgan Stanley & Co and JP Morgan Securities acted as financial advisers for SoftBank and Fortress respectively while Evercore acted as a financial adviser to the Special Committee of Fortress’s Board of Directors.
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