UPDATE 5-ESR says it has investor group’s proposal to take it private

(Updates ESR share move on Tuesday in paragraph 5, Morgan Stanley’s response in paragraph 11)

By Kane Wu and Julie Zhu

HONG KONG, May 14 (Reuters) – Hong Kong-listed real estate fund manager ESR Group, currently valued at $5.4 billion, halted trading in its shares on Monday, saying that a group of investors has proposed to take it private.

It said its backer, U.S. private equity firm Warburg Pincus LLC, and ESR’s founders believed the proposal was in the best interest of ESR shareholders, and were in discussions with the consortium.

ESR said in an exchange filing after the market close that it had received a non-binding, conditional proposal from a consortium controlled by Starwood Capital Group, Sixth Street Partners and SSW Partners that could result in a delisting.

It said that the proposal, which it received on April 25, would give its shareholders a choice between cash and rolling their shares into the future private company, subject to the terms of the final roll-over arrangements.

ESR shares jumped 22.8% to HK$12.28 when it resumed trading on Tuesday, their highest since Sept. 7, 2023.

The company did not disclose financial details, or say what conditions needed to be met or when a formal offer is expected.

The consortium would likely consider making an offer that is in line with the average 20%-to-30% premium paid in Hong Kong take-private deals in recent years, said two people with knowledge of the situation. That would apply to ESR’s last closing price of HK$8.35 before the proposal was submitted.

Such an offer would value the company at up to HK$45.7 billion ($5.85 billion), based on Reuters calculations.

The sources, who declined to be identified as the information was confidential, stressed that terms were not final and there was no certainty a deal would be finalised.

ESR said it has hired Citigroup as financial adviser to help evaluate the proposal.

The consortium is being advised by Morgan Stanley, two separate sources said. The bank declined to comment.

ESR declined to comment further as did a representative of the consortium, which already owns about 15.7% of ESR.

ESR said it has formed an independent board committee whose consideration of the proposal was at a “preliminary stage”.

ESR’s share close at HK$10 on Friday, the highest since March 4, valued it at $5.4 billion, according to LSEG data.

The shares have fallen 7.4% so far this year, compared with a 12% increase in the benchmark Hang Seng Index.

Reuters reported the take-private proposal earlier on Monday, with sources saying the discussions were at an early stage with terms yet to be finalised.

ESR manages a range of property-focused funds and its own property investments. It went public in Hong Kong in 2019 after pricing its initial public offering at HK$16.8 per share.

Starwood Capital, headquartered in Miami, Florida, has raised more than $75 billion since its inception in 1991 and has about $115 billion of assets under management, its website says.

California-based Six Street, founded in 2009, is an integrated investment firm covering areas including growth, infrastructure, real estate, direct lending and agriculture globally, according to its website.

New York-based SSW Partners invests in “high-quality businesses” and collaborates with partners, offering flexibility in deal structures, according to its website.

($1 = 7.8141 Hong Kong dollars) (Reporting by Kane Wu and Julie Zhu; Editing by Tomasz Janowski, Kevin Liffey and Jacqueline Wong)

(c) Copyright Thomson Reuters 2024. Click For Restrictions – https://agency.reuters.com/en/copyright.html