A consortium led by Starwood Capital Group, Sixth Street and SSW Partners, which also includes QIA, Warburg Pincus, the founders of ESR and ESR Group have jointly announced a proposal to privatise ESR by way of scheme of arrangement from the Hong Kong Stock Exchange.
The privatisation proposal values ESR at HK$55.2 billion ($9.53 billion) on an equity value basis, making it the largest privatisation from the Hong Kong Stock Exchange (HKSE) since 2021. The consortium holds 39.9% of the total issued shares of ESR.
In addition, the consortium has received co-investment equity commitments from highly reputable institutional investors who will be investing through both Starwood Capital and Warburg Pincus-managed vehicles, including Alpha Wave Ventures and a leading Asia public pension investor.
The consortium is of the view that the proposal provides a holistic solution for shareholders with an opportunity to elect between receiving cash to fully monetise their investment at a substantial premium, rolling their shares into the unlisted holding company EquityCo to participate in the next phase of the company’s development alongside the consortium, or a mix of these two options in a proportion of their choosing.
Shareholders who elect the share alternative will roll their scheme shares into EquityCo shares at a ratio of 1:1 alongside the consortium to pursue strategic transformation initiatives aimed at realising ESR’s platform value in the long term.
The cash alternative of HK$13.00 per scheme share represents a premium of 55.7% over the undisturbed closing price of HK$8.35 per share on April 24. The offer price is final, the consortium says.
A strategic transformation is required to realise ESR's platform value, the Dec 4 announcement reads. To effectuate this transformation, the company needs to transition to an asset-light platform, re-focus on new economy sectors, simplify its current portfolio with non-core asset divestitures, realise cost synergies and optimise its balance sheet.
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"These strategic initiatives may come with significant short-term earnings fluctuations and the consortium believes that the strategic transformation is best executed in a private setting, where decision-making and execution related to this transition would be more flexible, efficient and unconstrained by the listing rules," the consortium's announcement states.
The proposal, if successful, would transform the company’s shareholder register to include highly experienced world-class investors whose long-term capital will support the company’s strategic transformation and growth, while maintaining a prudent and effective governance structure that protects minority shareholders.
The consortium holds in aggregate 39.9% of the total number of issued shares in ESR, and will abstain from voting on the scheme at the court meeting to approve the scheme.
As at Dec 4, the consortium has received irrevocable undertakings in support of the proposal from shareholders representing approximately 51.2% of the scheme shares held by disinterested shareholders, including OMERS, John Lim, APG, The Straits Trading Company and SMBC.
