The story behind ESR Cayman’s acquisition of ARA Asset Management
On August 4, 2021, ESR Cayman, a leading Asia-focused real estate services and investment company, announced a proposed acquisition agreement with ARA Asset Management, an integrated real estate fund manager in Asia.
‘ESR’s vision has always been to build up a leading fund manager focused on technology-enabled real estate, especially logistics and – more recently – data centers on the back of major secular trends including the rapid rise of e-commerce, digital transformation and the financialization of real estate in Asia-Pacific,’ says Chang Rui Hua, group managing director of capital markets and IR at ESR Cayman.
ESR announced the proposed acquisition on the Stock Exchange of Hong Kong. Chang says the IR team was part of the internal ‘brain’ that worked closely with external financial and legal advisers. ESR’s internal teams made sure all transaction details were verified. The deal was first announced via a live video webcast for analysts and media that included a presentation of the transaction and a Q&A segment. This was attended by management teams from both ESR and ARA to demonstrate unity.
Chang explains that one-on-one calls and Zoom meetings with investors were prioritized for the top 30 shareholders in ESR’s register. She also points out that group calls were available to the other shareholders and potential investors through a four-day non-deal roadshow.
The ESR IR team also participated in four Asia-Pacific-based conferences and two non-deal roadshows that targeted Asia-Pacific and global institutional investors.
‘The management and investor relations teams continue to engage investors to explain the acquisition,’ Chang says. ‘Post-announcement, we have worked with two banks for the post-interim 2021 results non-deal roadshow, which was held two weeks following the announcement of the acquisition and connected with more than 70 investors.’
She highlights a key challenge in the transaction: to align the pure-play story with the new message about ESR being the third-largest listed real estate investment manager powered by new economy real estate.
She notes that the key investment objective was to effectively communicate to all stakeholders the benefits and long-term value creation of the transaction.
‘Our key strategy was to highlight that with the combination of ESR and ARA, the [new] enlarged entity would be even stronger and powered by the new economy while cementing our new position as the largest real estate fund management company in Asia-Pacific,’ she explains.
‘We also had to communicate the key benefit to investors that the main heart of the business would still be logistics and data centers.’
Chang says that a few weeks after the announcement, the teams saw a shift in investor sentiment and feedback. ‘After weeks of calibrated messaging through various back-to-back, one-on-one calls with more than 100 fund managers and post-interim results calls to more than 70 investors, we received more positive feedback from investors as they started to understand the key benefits of the transaction, compared with the initial knee-jerk reaction,’ she explains.
The circular for the transaction was sent to shareholders in October and an extraordinary general meeting held in November, at which point the deal gained shareholder approval with 90 percent positive votes; ESR had already obtained more than 50 percent of the irrevocable undertaking from existing ESR shareholders to support the deal.
This transaction is expected to complete by the end of 2021 or by the first quarter of 2022.
