SoftBank Group Corp. is buying alternative-asset manager Fortress Investment Group LLC for $3.3 billion in cash to operate alongside the company’s soon-to-be-established technology investment fund.
SoftBank will pay $8.08 a share for New York-based Fortress, a 39 percent premium to the company’s Feb. 13 closing price, according to a statement 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 $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 spokeswoman. The acquisition, subject to approval by Fortress shareholders as well as regulators, is expected to close in the second half.
“Fortress’ excellent track record speaks for itself, and we look forward to benefiting from its leadership, broad-based expertise and world-class investment platform,” Son, SoftBank’s chairman and CEO, said in the statement.
Shares of Fortress closed up 6.5 percent at $6.21 on Tuesday, giving the company a market value of about $2.4 billion.
“SoftBank is not doing a great job in communicating where this fits into their investment strategy,” said Tomoaki Kawasaki, an analyst at Iwai Cosmo Securities Co. “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 Edens, Nardone and Robert Kauffman, who came from Swiss bank UBS AG and New York-based BlackRock Financial Management Inc. Briger was hired from Goldman Sachs Group Inc. in 2002. The three founders became billionaires when the fund went public in 2007 raising $634.3 million in the first IPO by a private-equity firm.
Fortress 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 fallout of the global financial crisis has hit profitability.
Fortress managed $70.1 billion in credit assets, private equity holdings, hedge funds and fixed-income investments as of Sept. 30. Logan Circle Partners, a traditional bond fund manager inside Fortress, accounted for nearly half of that.
Fortress investments included distressed assets such as a railway operator in Florida and hotels in rural Japan, the film studio behind Oscar winners “Birdman” and “12 Years a Slave,” and a bitcoin startup. Nizar Al-Bassam and Dalinc Ariburnu of F.A.B.
SoftBank’s ties to Fortress date back to 2014, when Son hired Rajeev Misra away from the asset manager. Misra will head the Vision Fund, and the buyout may reunite him with his former colleagues in overseeing investments for Son.
The SoftBank chief has stepped up deal-making in recent years as he transforms his company from a Japanese telecom operator into a more diversified investment company.
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