SoftBank to acquire Fortress for $3.3bn

The New York-based investment manager will continue to operate within SoftBank as an independent business with Fortress’s senior investment professionals remaining in place.

SoftBank Group, the Japanese multinational telecommunications and internet corporation, has entered into a definitive merger agreement to acquire New York-listed Fortress Investment Group for $3.3 billion.

The deal, which was unanimously approved by a special committee of independent directors and Fortress’s full board of directors, will see Fortress Class A shareholders receive $8.08 per share, which represents a premium of 38.6 percent to the closing price of Fortress Class A common stock on February 13, 2017, and a premium of 51.2 percent to Fortress’s 3-month volume-weighted average price, excluding dividends.

Each Fortress Class A shareholder may additionally receive up to two regular quarterly dividends prior to the closing, each in an amount not to exceed $0.09 per Class A Share. Fortress plans to maintain its current base dividend of $0.09 per share for the fourth quarter of 2016 and, if closing does not occur prior to the applicable payment date, for the first quarter of 2017.

Fortress has 1,100 employees and manages $70.1 billion assets, as of 30 September 2016, on behalf of over 1,750 institutional clients and private investors worldwide across a range of private equity, credit, real estate and traditional asset management strategies.

Since inception in 1998, the firm's private equity business has invested approximately $23 billion of equity capital in 19 private equity investment funds on behalf of pension funds, university endowments and foundations, and other institutional investors. The firm is currently investing its $4 billion 2007-vintage vehicle, Fortress Investment V, which targets investments in transport and telecommunications, media and technology, according to PEI data.

Fortress will operate within SoftBank as an independent business and the firm’s principals, Pete Briger, Wes Edens and Randy Nardone will to continue to lead the New York-headquartered investment manager, with each having committed to invest 50 percent of their after-tax proceeds from the transaction in Fortress managed funds and vehicles, in addition to equity securities of SoftBank and SoftBank-managed funds and vehicles.

Fortress’s other senior investment professionals will remain in place and will retain their significant participation interests in fund performance.

“We are very pleased to announce an agreement setting our business on a great path forward as part of SoftBank, while creating significant value for our shareholders,” commented Fortress co-chairmen Briger and Edens.

“We join a company with tremendous scale and resources, and a culture completely aligned with our focus on performance, service and innovation. We anticipate substantial benefits for our investors and business as a whole, and we have never been more optimistic about our prospects going forward.”

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, who are also involved in Softbank’s Vision Fund, arranged the transaction and will continue to advise SoftBank with respect to Fortress.

Commenting on the transaction, Softbank Group Corp, chairman and CEO Masayoshi Son, said: “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.”

Son announced in an earnings call last week that the firm was in the “last phase” of its $100 billion fundraise for the Vision Fund. Launched in October last year and largely backed by Saudi Arabia’s Public Investment Fund and Softbank, the fund will be invested in tech companies globally. Tech companies Apple, Qualcomm and Foxconn, as well as the family office of Oracle founder Larry Ellison have also made commitments to the fund.

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.

Additional reporting by Carmela Mendoza