UPDATE: ESR Cayman to acquire ARA Asset Management for US$5.2B

U.S. one-dollar currency notes; taken September 2018.U.S. one-dollar currency notes; taken September 2018.

This article was originally published on Thursday, 5 August 2021 at 12:01 a.m. SGT; it has since been updated to include more details and a statement from Straits Trading. 

Hong Kong-listed ESR Cayman has entered a deal to acquire ARA Asset Management for US$5.2 billion, the two companies said in statements late Wednesday.

Around 90 percent of the consideration, or US$4.7 billion, will be paid in new ESR shares and vendor loan notes, while US$519 million will be paid in cash, partially funded by a US$250 million share placement to Sumitomo Mitsui Banking Corp. (SMBC), with US$269 million from debt and/or internal resources, the statement said. The consideration shares will be issued at HK$27 each, compared with Wednesday’s close at HK$27.70.

ESR said it is maintaining the option to fund up to an additional US$1.04 billion with cash.

The enlarged ESR Group will become Asia Pacific’s largest real estate and real asset manager, and the world’s third-largest listed real estate asset manager, with a combined assets under management (AUM) of US$129 billion, the statement filed to HKEx said. More than US$50 billion of the AUM will come from New Economy real estate, ESR said.

‘New Economy’ focus

“Our vision has always been to build a leading fund manager focused on technology enabled real estate, especially logistics and more recently data centers, on the back of major secular trends including the rapid rise of e-commerce, digital transformation and the
financialisation of real estate in Asia Pacific,” Jeffrey Perlman, chairman of ESR, said in the statement.

Perlman said leading global investors are seeking to divest institutional-quality assets to redeploy capital into New Economy real estate, where they are “meaningfully underweight.” That would allow the combined ESR and ARA to help those investors with their divestments while also assisting in their re-investments into New Economy real estate, he said.

ESR’s founders, OMERS and JD.com, which together have an aggregate shareholding of 46 percent, have agreed to vote in favor of the deal, ESR said.

ARA, with gross AUM of US$95 billion, operates a multi-product platform, covering REITs and private funds in real estate, infrastructure, renewables and credit, the statement said. ARA currently owns a controlling stake in LOGOS, a logistics and data center developer and fund manager, with a presence across Australia, China, Singapore, Indonesia, Malaysia, Vietnam, India, South Korea and New Zealand.

“Similar to ESR, LOGOS is a fully integrated developer and fund manager and manages all aspects of logistics and data centre real estate, including land sourcing, design and development, leasing, operations and asset management on behalf of some of the world’s largest investors,” the statement from ESR said. “On the fund management side, LOGOS has built a very strong following with 22 institutional capital partners, 14 of which are new to the enlarged ESR Group.”

John Lim, ARA co-founder and deputy chairman, along with a representative from each of CK Asset Holdings and SMBC will be appointed to ESR’s board of directors, the statement said.

The deal is expected to be completed in the fourth quarter of this year or the first quarter of 2022.

Straits Trading

In a separate filing to SGX Thursday, Singapore-listed Straits Trading, which holds an around 18.97 percent indirect stake in ARA Asset Management Ltd. via its wholly owned subsidiary Straits Equities Holdings (One), or SE1.

Straits Trading said SE1 would receive consideration of US$845.3 million, or around S$1.14 billion, under the deal, with around US$99.9 million in cash, US$678.4 million via the issuance of 195.4 million ESR shares and US$67 million via the issuance of 19.3 million vendor loan notes from ESR, assuming ESR doesn’t adjust the cash consideration. The vendor loan notes will be converted to shares once certain conditions are met, Straits Trading said.

CORRECTION: An earlier version of this article incorrectly stated ARA Asset Management was listed on SGX. The company delisted in 2017.