By Kimberley Kao


Hong Kong's ESR Group has received a takeover offer from a consortium of U.S.-based investment firms and others that values the Asia-focused warehouse developer at about $7 billion.

The proposed deal, which would mark the largest privatization from the Hong Kong bourse since 2021, has the support of a majority of shareholders, the company said.

ESR said late Wednesday that the buyout group had offered 13.00 Hong Kong dollars a share for about 60% of the company it doesn't already hold, valuing it at about HK$55.19 billion, the equivalent of about $7.09 billion. The offer represents a nearly 56% premium to the shares' price in April when investors submitted a first, non-binding offer.

The consortium, which is led by Starwood Capital Group, Sixth Street and SSW Partners and includes company founders, Warburg Pincus and an arm of sovereign wealth fund Qatar Investment Authority, holds nearly 40% of the total issued shares of ESR. The group said it had received support for the proposal from shareholders not involved in the buyout representing more than 51% of shares.

ESR has about $154 billion in assets under management, including data centers and logistics properties such as warehouses and distribution centers in countries including Australia, China, India, Japan, New Zealand, Singapore and South Korea.

The company has been hurt in recent years by underperforming markets in China and Hong Kong amid geopolitical tensions and concerns about economic growth. It has also faced a slowdown in the property sector in China, once its biggest market, as Beijing sought to rein in high debt levels.

Last year, ESR's revenue fell more than 20% in the greater China region, while in the first half of 2024 the company swung to a loss.

Shares, which earlier this year were 75% lower from their peak in 2021, remain well below their IPO pricing in 2019.

The buyout group blamed the poor share performance on negative sentiment from global investors reducing exposure to China and Hong Kong amid geopolitical concerns, and pressure from short selling by investors as a "proxy to bet against the Chinese residential real estate market."

The group said ESR was in need of a "strategic transformation" that would involve transitioning to an "asset-light platform," divesting non-core assets, optimizing its balance sheet and refocusing on "new economy" sectors. The group said those moves could lead to earnings volatility in the short term, making a delisting a better option for executives seeking flexibility to chart a new course.

Shares were 4.7% higher in afternoon trade Thursday, their first day of trading since being halted Nov. 29 pending the announcement.

The buyout offer ends months of negotiations over the future of ESR. A privatization proposal submitted in May, which didn't include Warburg Pincus--the company's biggest shareholder--and QIA, sent shares up 26%, a record one-day rise.

Morgan Stanley, Deutsche Bank, Goldman Sachs, UBS, United Overseas bank and Citigroup are among advisers on the deal.


Write to Kimberley Kao at kimberley.kao@wsj.com


(END) Dow Jones Newswires

12-05-24 0014ET