Softbank To Acquire Fortress Investment Group For $3.3B

Feb 15 2017 | 9:08pm ET

Japan’s SoftBank Group has agreed to acquire publicly traded alternative investment management giant Fortress Investment Group for $8.08 per share, or approximately $3.3 billion in cash.

The agreement values Fortress at a nearly 40% premium to its February 13 closing price of around $5.83 per share, and for a 51% premium over its trailing 3-month volume-weighted average price, according to a statement. Investors have quickly narrowed the premium since the announcement, with the stock surging more than 28% in Wednesday trading to close just shy of $8 per share. 

While the acquisition values Fortress at a significant premium to its recent valuation, it is a far cry from the company IPO price of $18.50 in February 2007, and the nearly $30 per share it reached on its first day of trading. The financial crisis, a series of operational and fund performance challenges and a general apathy towards alternative investment managers last year all hurt the company’s share price, pushing it to lows just above $4 per share in February 2016.

Fortress shareholders will also be entitled to two regular quarterly dividends prior to the deal’s closing, the statement said, each in an amount not to exceed $0.09 per class A share.

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 2017.

Almost immediately following the deal’s announcement, industry observers began speculating whether the extraordinary premium Softbank is paying for Fortress is a harbinger of things to come in the private equity and alternative assets space, or a one-off with no last impact on the space.

The deal is the first major move for Softbank since CEO Masayoshi Son unveiled a $100 billion “Vision” fund, launched last October and supported by strategic third-party investors such as Apple and Saudi Arabia's public pension fund aimed at making investments into highly disruptive technology companies. 

As part of the agreement, Fortress principals Pete Briger, Wes Edens and Randy Nardone will continue leading the company and invest at least 50% of their after-tax proceeds from the transaction into Fortress-managed funds and vehicles, the statement continued.

Following the deal’s close, Fortress will become an independent unit of Softbank based in New York and will work closely alongside Softbank’s new Vision Fund investment platform.

Primary advisors on the transaction for Softbank were J.P. Morgan Securities LLC as financial advisor, Weil, Gotshal & Manges LLP and Kirkland & Ellis LLP as legal counsel, and KPMG LLP as accounting and tax advisor. For Fortress, Morgan Stanley & Co. LLC acted as financial advisor, and Skadden, Arps, Slate, Meagher & Flom LLP as legal counsel. 

Founded in 1998 by Edens, Nardone and Robert Kauffman, Fortress manages more than $70 billion across a number of alternative investment strategies as of September 30, 2016. It was the first private equity and hedge fund manager to sell shares to the public and manages assets on behalf of more than 1,750 institutional clients and private investors worldwide.

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