SoftBank to buy Fortress for $4.7b cash

TOKYO • SoftBank Group is buying alternative-asset manager Fortress Investment Group for US$3.3 billion (S$4.7 billion) in cash to operate alongside the Japanese company's soon-to-be-established technology investment fund.

Japan's SoftBank will pay US$8.08 a share for New York-based Fortress, a 39 per cent premium to the company's Feb 13 closing price, according to a statement on Tuesday.

Fortress principals Pete Briger, Wes Edens and Randy Nardone have agreed to continue leading the business, which will remain based in New York and operate independently within SoftBank, according to the statement. SoftBank's founder Masayoshi Son is in the process of creating a US$100 billion Vision Fund with Saudi Arabia and other backers that would make the Japanese billionaire one of the world's biggest technology investors.

The Fortress deal will be separate from that vehicle and is aimed at bringing investment talent in-house, according to a SoftBank spokesman. The acquisition, subject to approval by Fortress shareholders as well as regulators, is expected to close in the second half.

"Fortress's excellent track record speaks for itself, and we look forward to benefiting from its leadership, broad-based expertise and world-class investment platform," Mr Son said in the statement.

BRINGING INVESTMENT TALENT IN-HOUSE

Fortress's excellent track record speaks for itself, and we look forward to benefiting from its leadership, broad-based expertise and world-class investment platform.

MR MASAYOSHI SON, SoftBank's chairman and CEO.

Shares of Fortress closed up 6.5 per cent at US$6.21 on Tuesday, giving the New York-based company a market value of about US$2.4 billion. SoftBank rose 1.6 per cent in Tokyo on Wednesday.

"SoftBank is not doing a great job in communicating where this fits into their investment strategy," said an analyst at Iwai Cosmo Securities Tomoaki Kawasaki. "There isn't enough information and some people have an impression that this is an investment by the Vision Fund."

Fortress was founded in 1998 by Mr Edens, Mr Nardone and Mr Robert Kauffman, who came from Swiss bank UBS and New York-based BlackRock Financial Management. Mr Briger was hired from Goldman Sachs Group in 2002. The three founders became billionaires when the fund went public in 2007, raising US$634.3 million in the first initial public offering (IPO) by a private-equity firm.

Fortress's stock has slumped by nearly two-thirds since the listing, after the company booked losses over the first five years. The performance has come despite a more than doubling of assets managed by the firm, as dwindling performance by investment managers in the fall-out of the global financial crisis has hit profitability. 

SoftBank aims to close the first round of investment in the Vision Fund by the end of this month, according to people familiar with the matter.

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A version of this article appeared in the print edition of The Straits Times on February 16, 2017, with the headline 'SoftBank to buy Fortress for $4.7b cash'. Print Edition | Subscribe