The $34 billion Hong Kong-headquartered logistics platform ESR is paying $5.2 billion to acquire the $95 billion Singapore-headquartered real assets manager ARA Asset Management. Here are the five things you may not know about the transaction.
A new name has yet to be confirmed for the $129 billion manager
The new combined entity will become Asia-Pacific’s largest real assets fund management platform with $129 billion assets under management, according to an ESR presentation. Excluding ARA’s associate companies, the group will have over 50 percent, or $50 billion of its AUM, in new economy sectors, with ARA contributing $17 billion from its logistics subsidiary LOGOS Property Group. However, ESR has yet to confirm a new name for the integrated platform, which is currently being referred to as the “Enlarged ESR Group.”
ARA to acquire minority interests in LOGOS
ARA will buy out the minority shareholders of LOGOS before the completion of the transaction. After that, the Enlarged ESR Group will hold 84.6 percent of LOGOS. Last year, ARA is understood to have acquired 52 percent of shares from LOGOS’s three original shareholders, the Canadian institutional investor Ivanhoé Cambridge, Australian banking group Macquarie and the firm’s own management.
ESR and LOGOS will run in parallel in the immediate term
A full integration plan between LOGOS and ESR has not been decided yet. Following the transaction, the Enlarged ESR Group will own 86.4 percent of LOGOS and the latter will bring 14 new institutional investors into the new platform. The firm said on the release that a full integration is being “planned for the longer term” as the platforms will focus on today’s “land grab” phase of data center and logistics sectors. For now, the co-founders of LOGOS will continue to lead its business on a day-to-day basis.
Non-core assets will be divested
Aside from its new economy assets, ARA also will bring $78 billion of other real assets holdings including traditional real estate, real estate credit and infrastructure into the new platform. The senior management of the Enlarged ESR Group is currently evaluating “all aspects of ARA’s businesses” and identifying the key parts of the business that are “most relevant to ESR’s vision and strategy.” At the same time, the Enlarged ESR Group is also “seeking to divest any non-core/non-long-term value enhancing aspects” of the combined firm.
Warburg Pincus will return as a shareholder
Private equity firm Warburg Pincus, shareholder of ARA and former shareholder of ESR, will be back as a shareholder at the Enlarged ESR Group upon the completion of the transaction. Following the transaction, the firm, which currently holds a 46 percent interest in ARA, will own a 12.3 percent stake of the new entity. Warburg Pincus co-founded Chinese logistics platform E-Shang in 2011, which merged with Singapore-headquartered firm Redwood to become ESR in 2016. The private equity firm held approximately a 38 percent stake in ESR in 2019 and fully exited the business in 2020.