Japanese Tech Conglomerate to Acquire Fortress Investment Group for $3.3B

by Jeff Shaw

NEW YORK AND TOKYO — SoftBank Group Corp., a Tokyo-based tech conglomerate, has entered into a definitive merger agreement under which the company will acquire equity firm Fortress Investment Group LLC (NYSE: FIG) for approximately $3.3 billion in cash. Fortress is an investor in both independent living giant Holiday Retirement and publicly traded seniors housing REIT New Senior Investment Group.

Founded in 1998, Fortress has 1,100 employees and $70.1 billion in assets under management as of Sept. 30, 2016. Private equity funds and permanent capital vehicles, including commercial real estate, comprise about 65 percent of the company’s portfolio.

“Fortress’ excellent track record speaks for itself, and we look forward to benefitting from its leadership, broad-based expertise and world-class investment platform,” says 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,” adds Son.

SoftBank’s global portfolio of companies includes advanced telecommunications, internet services, artificial intelligence, smart robotics, clean energy technology and Internet of Things (IoT) providers. Last September, SoftBank acquired ARM Holdings plc, the world’s leading semiconductor intellectual property company.

In the past three months, Fortress has sold Riverplace Tower, an office tower in downtown Jacksonville, and Revolution Studios, a movie production company that owned the rights of 126 films and 240 TV episodes at the time of sale. Fortress has also recently purchased a portfolio of non-performing Italian loans from UniCredit S.p.A.

Fortress’s board of directors unanimously approved the SoftBank-Fortress merger agreement. The transaction is subject to approval by Fortress shareholders, certain regulatory approvals and other customary closing conditions, and is expected to close in the second half of this year. Once the transaction closes, Fortress will no longer be publicly traded on the New York Stock Exchange, according to a source familiar with the deal.

Pete Briger, Wes Edens and Randy Nardone have agreed to continue to lead Fortress, and have committed to invest 50 percent of their after-tax proceeds from the transaction in Fortress-managed funds and vehicles and in equity securities of SoftBank and SoftBank-managed funds and vehicles.

Fortress’ senior investment professionals will remain in place and will retain their participation interests in fund performance. Fortress will operate within SoftBank as an independent business headquartered in New York, and SoftBank will retain the leadership, business model, brand, personnel, processes and culture of the global asset manager.

SoftBanks’ advisors included financial advisor J.P. Morgan Securities LLC; legal counsel Weil, Gotshal & Manges LLP and Kirkland & Ellis; and accounting and tax advisor KPMG LLP. 

Fortress’ advisors included financial advisor Morgan Stanley & Co. LLC and legal counsel Skadden, Arps, Slate, Meagher & Flom LLP and Paul, Weiss, Rifkind, Wharton & Garrison LLP. Evercore acted as financial advisor, and Davis Polk & Wardwell LLP provided legal counsel to the special committee of Fortress’s board of directors, which unanimously approved the merger.

Under the terms of the agreement, SoftBank can bring in partners for a portion of the investment. Nizar Al-Bassam and Dalinc Ariburnu of F.A.B. Partners arranged the transaction and will continue to advise SoftBank with respect to Fortress.

New York-based Fortress manages assets for over 1,750 institutional clients and private investors worldwide across private equity, credit, real estate, senior living and traditional asset management platforms. 

The stock price for Fortress closed on Wednesday, Feb. 15 at $7.99 per share, up from $4.19 per share last year.

— John Nelson

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