Earlier this week, a cash deal was announced under which New York-based asset manager, Fortress Investment Group LLC FIG will be taken over by Japan-based SoftBank Group Corp. for about $3.3 billion. Following the news, shares of Fortress climbed significantly by 28.66% to close at $7.99.
“Fortress’s excellent track record speaks for itself, and we look forward to benefitting from its leadership, broad-based expertise and world-class investment platform,” said Masayoshi Son, Chairman and CEO of SoftBank Group Corp. “For SoftBank, this opportunity will immediately help expand our group capabilities, and, alongside our soon-to-be-established SoftBank Vision Fund platform, will accelerate our SoftBank 2.0 transformation strategy of bold, disciplined investment and world class execution to drive sustainable long-term growth."
The transaction awaits Fortress shareholders’ approval, certain regulatory approvals and other customary closing conditions. Further, the deal is anticipated to close in second-half 2017.
Terms of the Agreement
Per the terms of the agreement, each Fortress Class A shareholder will get $8.08 per share, at a premium of 38.6% to the closing price of Fortress Class A common stock on Feb 13, 2017, and a premium of 51.2% to Fortress’s three-month volume-weighted average price, excluding dividends. In addition, each Fortress Class A shareholder will be paid two regular quarterly dividends prior to the closing of the deal, not exceeding 9 cents per share.
Per the deal, Fortress principals will be continuing to lead Fortress, operating within SoftBank as an independent New York-based business. Senior fund managers would also be part of the group.
Moreover, Fortress principals will be investing 50% of their after-tax proceeds from the agreement in Fortress-managed funds and vehicles, and will be voting shares of a total 34.99% of the outstanding Fortress voting shares, which are held by them in favor of the deal.
Notably, SoftBank is permitted to involve in partners for partly investment.
J.P. Morgan Securities LLC, a unit of JPMorgan Chase & Co. JPM acted as a financial advisor to SoftBank; while Morgan Stanley & Co. LLC, a unit of Morgan Stanley MS acted as the financial advisor to Fortress.
Fortress has a diversified portfolio with a range of hedge fund strategies, from bitcoin to timber. However, the asset manager failed to be competitive with its bigger peers, including The Blackstone Group L.P. BX in the terms of assets under management growth. Also, the volatile performance amid a financial crisis was also an undermining factor for the decline.
Fortress’ shares have declined around 4.5% in 2016, as against 3.3% gain in the Zacks categorized Investment Management industry.
At present, Fortress carries a Zacks Rank #5 (Strong Sell).
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