A consortium led by private investment firms Starwood Capital Group and Warburg Pincus is working to finalise a deal to take ESR Group private, valuing the Hong Kong-listed real estate fund manager at over $7bn, according to a report by Reuters.
The report cites unnamed insiders familiar with the matter as revealing that the group also includes ESR’s founders and a subsidiary of the Qatar Investment Authority, signalling strong investor confidence despite challenges in the Chinese property market.
Since the initial take-private proposal was announced on 14 May, ESR’s shares have risen 14.4%, data from LSEG shows. Trading in the company’s shares was halted on Friday pending an announcement related to mergers and acquisitions.
Warburg Pincus, ESR’s largest shareholder with a 14% stake, plans to roll over its holdings into the new private entity rather than sell for cash, according to one of the sources. The consortium, which initially included Starwood Capital, Sixth Street Partners, and SSW Partners, has since expanded to include Warburg Pincus and other investors.
In its May announcement, ESR stated that the proposal offered shareholders the option of receiving cash or rolling their shares into the new company, subject to the final terms of the deal.
However, the specifics of the agreement, including the final offer price, remain under negotiation and could change, the sources added.
The buyout comes amid a downturn in China’s property market, which has weighed heavily on ESR’s stock. The company’s shares have fallen over 60% since their 2021 peak, significantly underperforming Hong Kong’s Hang Seng Index, which declined about a third during the same period.
Founded in Shanghai in 2011 by its executives and Warburg Pincus, ESR has grown through a series of acquisitions and now manages a diverse portfolio of property-focused funds and real estate investments. The company raised $1.6bn during its 2019 IPO in Hong Kong, pricing shares at HKD16.8 each.
Despite recent market challenges, ESR has continued to expand, securing approval in June from China’s securities regulator to list its logistics real estate arm on the Shanghai Stock Exchange. The listing, expected to raise RMB2.44bn ($337m), launched on Friday, with pricing details forthcoming.
