ESR take-private throws up Asia exit quandary

Samsonite SA

13/12/2024 03:33

(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own.)
    By Anshuman Daga
       SINGAPORE, Dec 13 (Reuters Breakingviews) - A group led
by U.S. investors offered to privatise the Asian real estate
fund manager for $7 billion. Hong Kong's dismal market and ESR's
 1821.HK  complex business merit the move, yet its backers will
find their options for an exit are narrow. That's no fault of
the company. Asia is changed and there are limited options for
regional groups with initial public offering dreams.
    ESR's new owners may have other plans. They could revamp the
firm, trim its asset-heavy portfolio and ultimately sell it to
rivals or other buyout funds. Data from Bain shows that IPOs
accounted for just 40% of the value of exits for private equity
funds in Asia Pacific last year.
    Yet, the option to fall back on public markets is a false
illusion. Replicating an ESR-like listing in Asia today is hard
to fathom. Hong Kong is no longer a desired venue for pan-Asian
businesses: Skincare group L'Occitane went private this year and
luggage maker Samsonite  1910.HK  is considering listing its
shares on a second exchange beyond the financial hub. 
    The Chinese economy's troubles and Beijing's tightening
regulations have battered activity too. IPO volumes in Hong Kong
are down some 80% so far this year from 2019 levels, per
Dealogic. That has pushed Hong Kong behind India, China and
Japan in regional rankings.
    Overall, take-privates are gathering steam but exit options
are bleak. Despite Hong Kong's troubles, no other Asian bourse
is stepping up as a natural home for regional businesses.
Singapore's stock market suffers from poor liquidity and has
fallen off the radar for issuers. Activity in India is booming
but it has a strong domestic flavour: South Korean companies
like Hyundai  005380.KS  are listing their fast-growing
subsidiaries in the South Asian country.
    It's unclear whether the outlook will improve over the
coming years. A lot depends on China's economic strength, how
the Sino-American relationship evolves, and the impact this has
on equity markets. Beijing is pushing to shore up Hong Kong's
status as an international financial hub. That might eventually
lure back pan-Asian businesses. For now, those taking companies
private won't be counting on an IPO as an off ramp.
    Follow @anshumandaga on X
         
    CONTEXT NEWS 
    A consortium of U.S. investors including Starwood Capital,
Sixth Street, SSW Partners and Warburg Pincus has made a binding
takeover offer that values Hong Kong-listed ESR Group at $7.1
billion, the target said on Dec. 4.
    The offer price of HK$13 represents a 56% premium to ESR's
undisturbed closing price from late April. The shares have
plunged 60% from their peak of 2021.

 (Editing by Una Galani and Ujjaini Dutta)
 ((For previous columns by the author, Reuters customers can
click on  DAGA/ 
anshuman.daga@thomsonreuters.com))