Consortium aims to seal ESR buyout in coming weeks, likely valuing it at over $7 billion, say sources

(Corrects metric in paragraph 2 to stock move since announcement, not average share price; removes first bullet point on average price)

By Kane Wu and Julie Zhu

HONG KONG (Reuters) -A consortium including Starwood Capital Group and Warburg Pincus aims to finalise a deal to take ESR Group private in the coming weeks, valuing the Hong Kong-listed real estate fund manager at over $7 billion, said two sources.

The consortium, according to ESR, also includes its founders and a unit of sovereign wealth fund Qatar Investment Authority. Since the offer the shares of the company are up 14.4% from the closing price on the last trading day before the first take-private announcement, LSEG data showed.

The sources, who have knowledge of the matter, declined to be named as the information was confidential.

Representatives for the consortium and Warburg declined to comment, while ESR did not respond to requests for comment.

Warburg Pincus, ESR’s top shareholder with a 14% stake, plans to roll over its holdings into the future private company, rather than cash out, said the two sources and two other people with knowledge of the matter.

Terms of the deal, including the offer price, are not finalised, however, and can still change, the sources said.

ESR said in May it had received an initial proposal from a consortium led by Starwood Capital Group, Sixth Street Partners and SSW Partners, aiming to take the company private.

It said that proposal, received on April 25, would allow its shareholders to choose between receiving cash and rolling their shares into the new company, subject to the terms of the final roll-over arrangements. The consortium subsequently expanded to include Warburg Pincus and others.

The deal comes as ESR shares have fallen in the last couple of years amid China’s property market slump. The stock is down over 60% from a 2021 peak, while the benchmark has fallen about a third during the period.

ESR manages a range of property-focused funds and its own property investments. It went public in Hong Kong in 2019 after pricing its initial public offering (IPO) at HK$16.8 per share, raising $1.6 billion.

In June, the group said it had received approval from China’s securities regulator to list its logistics real estate firm in the country and expected to raise around 2.44 billion yuan ($336 million) from the listing.

That listing has yet to happen.

ESR was co-founded by its executives and private equity firm Warburg Pincus in Shanghai in 2011 and has expanded over the years via a string of acquisitions.

($1 = 7.7816 Hong Kong dollars)