SoftBank’s Fortress acquisition may signal interest in more GP deals

Softbank Group Corp may have just gotten started. 

Its $3.3 billion acquisition of Fortress Investment Group, announced Feb. 15, may be the bank’s first of several such GP deals, a private equity executive said.

SoftBank is expected to follow the route set by Dyal Capital Partners and Goldman Sachs and acquire stakes in other PE funds, the person said. “This is a very large additional step in that direction and quite consistent,” the GP said.

Deals may not be immediately on tap. SoftBank’s focus at this time is to work with Fortress Investment Group’s team to bring them into the SoftBank family, rather than look for further acquisitions, said a source familiar with the matter.

SoftBank agreed to buy Fortress in a deal valued at about $3.3 billion. The transaction comes after SoftBank in October said it was teaming up with Saudi Arabia to set up a $100 billion technology fund, Reuters said.

Fortress had $70 billion in investments under management at the end of September 2016. In addition to PE, the firm invests in real estate, hedge funds and credit. Fortress will operate within SoftBank as an independent business, Reuters said.

The Fortress principals — Pete Briger, Wes Edens and Randy Nardone — will continue to lead the firm, a statement said. Briger, Edens and Nardone will also reap a combined $1.39 billion windfall from the sale to SoftBank, Bloomberg said.

This will be the second payout for Fortress partners. Before it went public, Fortress issued $1.7 billion in dividends and private stock sales to Edens, Briger and three other principals, Bloomberg said.

The Softbank transaction was a result of certain key relationships, sources told Buyouts. 

Rajeev Misra, SoftBank’s head of strategic finance, left Fortress in 2014. He heads SoftBank’s $100 billion Vision fund. (SoftBank, not the Vision fund, is buying Fortress, according to press reports.)

A second GP referred to SoftBank’s global network of clients and relationships. SoftBank will likely market both its funds and interest in Fortress GP to clients, the person said.

The $3.3 billion sale comes a decade after Fortress went public. In 2007, Fortress was the first of the global buyout shops to launch an IPO. Others, including Blackstone Group, Carlyle Group and Apollo Global Management, followed Fortress in going public.

Fortress could not immediately be reached for comment.

Action Item: Contact Randy Nardone, Fortress co-founder and CEO, at rnardone@fortress.com

SoftBank Group Corp Chairman and CEO Masayoshi Son attends a news conference in Tokyo on Feb. 8, 2017. Photo courtesy Reuters/Toru Hanai