The Zhitong Finance App learned that due to rumors about progress in privatization, the warehousing and logistics development and operation service provider ESR (01821) rose sharply by about 10% in the intraday period on May 7, but declined on the following trading day.
According to market news, the US Warburg Pincus Investment Group (Warburg Pincus) is leading a consortium to privatize ESR, its logistics platform listed in Hong Kong. According to the rumor, the ESR board has received an official tender from the consortium to privatize ListCo for $7-80 billion. Based on ESR's current market capitalization, the potential privatization premium is around 40% to 60%. Rumors also indicated that the board of directors had agreed to proceed. The deal is largely funded. The transaction is expected to close in the second half of 2024.
According to reports, Warburg Pincus mentioned in the rumor is ESR's largest shareholder. According to the 2023 financial report, ESR has total assets under management of US$156.1 billion, and its business covers many countries and regions such as Greater China, Japan, South Korea, Australia, New Zealand, and Southeast Asia. The company's stock price fell to a record low of HK$7.18 after the announcement of the 2023 results. Although the stock price rebounded with the market since then, the current stock price only reflects 0.6 times the net market ratio and is still at an all-time low.
Furthermore, the company has continued to make repurchases since 2022, with a maximum repurchase price of HK$23. Therefore, a potential privatization deal does not rule out that the majority shareholder Warburg Pincus believes that the current share price far does not reflect ESR's intrinsic value, and plans to buy back the listed company from public investors at an ideal price.
Analysts said that since logistics assets can generate stable cash flow, they are generally favored by large international institutions such as Middle Eastern investors and sovereign funds, which helps Warburg Pincus to raise more capital in the international capital market to support potential privatization offers.
As of the press date, the company had not issued any clarifications.