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Business deals

Unizo opts for employee buyout amid takeover battle

US fund Lone Star throws weight behind acquisition of Japanese hotelier

The logo of Hotel Unizo, under Japanese hotel operator Unizo Holdings, at the entrance of a Tokyo location.   © Reuters

TOKYO -- Unizo Holdings plans to delist via an employee buyout backed by U.S. fund Lone Star Global Acquisitions, the Japanese hotel chain said Sunday, possibly ending a monthslong takeover feud.

An entity formed by Unizo employees and Lone Star will carry out a tender offer starting Tuesday, aiming to acquire all Unizo shares except treasury stock. It will pay 5,100 yen per share -- a 4% premium over Friday's closing price.

Lone Star is ready to raise up to the nearly 175 billion yen ($1.6 billion) in needed funds by subscribing to up to 45 billion yen in preferred shares and lending the entity up to 130 billion yen. Tokai Tokyo Securities will be the tender offer agent.

Should the employee buyout succeed, a total of 43 officials at Unizo and group companies will step down, including Unizo Holdings CEO Tetsuji Kosaki. A new management team selected from within Unizo will work with Lone Star to tackle such tasks as improving the profitability of properties and selling off assets.

U.S. fund Fortress Investment Group, a SoftBank Group company, is conducting a tender offer for Unizo shares until Jan. 8 for 4,100 yen per share. Unizo, which had withheld its opinion on this offer, now says it is opposed and instead supports the employee buyout proposal.

Accordingly, Unizo will break off negotiations with others that had made acquisition bids, including U.S. investment fund Blackstone Group.

The tug of war started in July when Japanese travel agency H.I.S. made a hostile takeover attempt. This prompted Unizo to choose Fortress as a white knight, and the U.S. fund launched its tender offer in August.

But after the threat from H.I.S. ended, Unizo and Fortress clashed over the post-acquisition rights of employees, leading to Unizo dropping its support for the tender offer.

Yet another buyout offer came in the fall from a group of foreign and domestic funds and companies, including Blackstone. Unizo demanded a tender offer price of at least 5,000 yen and a promise to protect its employees' jobs.

After discussing the matter with the various players involved, Unizo deemed a Lone Star-backed employee buyout its best option.

Such buyout drama is unusual in Japan. In the U.S. and Europe, new proposals are frequently made while acquisition procedures are underway, resulting in a different company becoming the buyer. The multiple buyout proposals made over Unizo signal that the process is becoming more open here, with competing acquisition conditions on the table.

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