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Lone Star’s Unizo Offer Raises Bar in Rare Japan Bidding War

Elena Mazneva and Min Jeong Lee

(Bloomberg) -- Unizo Holdings Co.’s latest takeover offer is seen raising the bar for Blackstone Group Inc., which has been the most persistent in the bidding war for the Japanese real-estate operator.

Unizo backed a takeover offer made by its employees in partnership with Lone Star Group worth 174.4 billion yen ($1.6 billion), saying in a statement on Sunday that the offer price of 5,100 yen per common share is above proposals made by other bidders. The stock rose 5.3% to close at 5,160 yen in Tokyo on Monday.

Blackstone is evaluating the new development and assessing its options with respect to Unizo, it said in an emailed statement after the market close.

Unizo has been caught in a rare battle among global investing behemoths since a travel-agency operator launched a surprise tender offer in July. Fortress Investment Group and a number of other investment firms joined the fray before Blackstone came in with an offer of 5,000 yen per share. Unizo has withheld support for that offer as it became clear that management was getting cold feet about an outright sale.

“The Lone Star transaction now sets a deliverable benchmark for the stock -- and there remains the possibility that Blackstone or Fortress could return with a similar transaction structure at a higher price,” said Justin Tang, head of Asian research at United First Partners, an investment and advisory group that specializes in special situations. The fact that the stock “is trading slightly through the terms is a reflection of investors’ expectations.”

Such acquisitions have hardly ever been attempted in the country because shareholders traditionally support incumbent management. Unizo’s top shareholder, Elliott Management Corp., has supported the talks with Blackstone.

Unizo’s board has recommended its shareholders accept the latest proposal, made as a tender offer through Tokyo-based Chitocea Investment Co. Lone Star, a U.S. private equity fund, holds 27% of the common stock in Chitocea Investment and will provide the necessary funding, according to Unizo. The remaining 73% is owned by an entity that was created by Unizo Group employees. However, the question of control of Chitocea Investment is complicated by a plan to also issue preferred shares to Lone Star in return for part of its financing of the deal.

Heavyweights of Global Investing Circle an Obscure Japan Stock

“I expect that it will succeed because I do not expect an overbid from a new vehicle from Blackstone or someone else who would be willing to adopt a similar construct,” Travis Lundy, a special-situations analyst wrote in a note on Smartkarma. “The most likely scenario is that current shareholders get out at 5,100 yen or higher,” he said separately in an interview.

(Adds comment from Blackstone in third paragraph)

--With assistance from Ichiro Suzuki.

To contact the reporters on this story: Elena Mazneva in London at emazneva@bloomberg.net;Min Jeong Lee in Tokyo at mlee754@bloomberg.net

To contact the editors responsible for this story: Lianting Tu at ltu4@bloomberg.net, Kana Nishizawa, Kurt Schussler

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