A group led by U.S. investment firm Aetos Capital has outbid Morgan Stanleyand others by offering 300 billion yen ($2.7 billion) for a roughly 30 percent stake in Japanese property developer Daito Trust Construction a financial source said on Friday.
The proposal by the group, which includes real estate group Mori Trust and local private equity firm Unison Capital, exceeds the rival bid by an alliance of Morgan Stanley and Lehman Brothers , which offered some 240 billion yen ($2.2 billion), the source said.
They are bidding for the stake held by Daito's founder and chairman, Katsumi Tada, who is selling his 29.2 percent holding in the company, said the source, who spoke on condition of anonymity.
Daito management is seen likely to decide whether to endorse the buyout at a board meeting this month.
The Nikkei business daily reported that Aetos and its allies are proposing to buy all outstanding shares of Daito for 920-930 billion yen ($8.4-8.5 billion) in what would be the largest buyout of a Japanese firm by an investment fund.
It would top the $3 billion buyout of restaurant operator Skylark in 2006 by Carlyle and Unison Capital and the $1.2 billion acquisition in 1999 of bankrupt Long Term Credit Bank of Japan, subsequently renamed Shinsei, by a consortium led by U.S. fund Ripplewood, according to data from Thomson Financial.
Aetos's bid for all shares is contingent on Daito management's endorsement of the buyout, but aside from Tada, many of the firm's senior executives are wary of such a transaction since the consequent delisting from the Tokyo stock exchange could pose problems for its operations, the Nikkei said.
The Tokyo stock exchange suspended trade in Daito shares following the Nikkei report. The stock last traded at 6,190 yen, 15.4 times Reuters consensus of 2008 earnings estimates.
Analysts in Tokyo were divided on their reaction to reports of a buyout. One noted that the company has strong operating cash flow and unrealised gains on its head office in Tokyo.
Others worried that vacancy rates on the properties managed by Daito may start to rise as construction in Tokyo continues apace. They were also concerned that a buyout may impair Daito's ability to win orders and may lead to defections by staff.
Shares in rival firm Leopalace21 fell 5.8 percent to 2,835 yen, 26.8 times 2008 earnings estimates, and the benchmark Nikkei 225 Index was 4 percent lower at 14,691.4 points.