ESR Cayman is acquiring ARA Asset Management for US$5.2 billion to form one of the world's largest real estate management firms with total assets under management of some US$129 billion.
Under terms of an agreement announced late in the evening of Aug 4, the deal has an irrevocable undertaking given by OMERS and JD.com, two key ESR shareholders holding a combined 46% stake.
Founded in 2002 and listed on the SGX between 2007-2017, ARA claims it is the largest real asset manager in Asia-Pacific along with its subsidiary, LOGOS.
ARA counts some US$95 billion in gross AUM. It manages five listed REITs including Suntec REIT, Fortune REIT and ARA LOGOS Logistics Trust, and one listed business trust. ARA also manages three private REITs, and has stakes in Australian-based Cromwell Property Group, and Kenedix Office Investment Corp.
ARA’s business will be combined with ESR’s platform. The enlarged ESR Group will become the largest real estate and real asset manager in Asia, and the world’s third largest listed real estate asset manager. The combined AUM of US$129 billion consists of more than US$50 billion worth in so-called New Economy real estate, such as logistics and data centres.
Based on ESR’s financial results for 2020, over 80% of the enlarged ESR Group’s Ebitda will come from New Economy real estate, while more than 50% of its AUM will come from perpetual and core capital vehicles (including 14 listed REITs).
ESR will acquire 100% share capital of ARA via a 90/10 stock/cash transaction, which comprises US$4.7 billion in new ESR shares and vendor loan notes; and US$519 million funded by a US$250 million placement to SMBC, and US$269 million in debt.
All ARA shareholders will rollover their ownership interest into ESR and have agreed to lock-up of six months. Furthermore, it is contemplated at the close of the transaction ESR’s founders and ARA’s co-founder, John Lim, would have committed to a lock-up of up to 36 months on a staggered basis.
The transaction is subject to ESR shareholders’ approval at an EGM to be convened in due course. The Transaction is subject to customary closing conditions including, amongst others, regulatory approvals. Closing is expected by the end of 2021 or first quarter 2022.
Morgan Stanley Asia is acting as financial advisor, and Freshfields Bruckhaus Deringer is serving as legal counsel to ESR. In addition, United Overseas Bank is providing certain debt and financing related advice to ESR on the transaction.
Citigroup Global Markets Singapore is acting as lead financial advisor to ARA, and DBS and OCBC Bank have also been appointed as financial advisors, and Latham & Watkins is serving as legal counsel to ARA.
Photo credit ARA LOGOS Logistics Trust: a logistics warehouse in Australia
