SoftBank-backed investment group Fortress has bet $ 3.5 billion on the role of golf and hotels in Japan’s post-Covid recovery after reaching a deal that the largest private equity firms in the world have dismissed it as being too expensive.
Fortress bought Accordia Golf, Japan’s largest golf course portfolio that was originally formed by Goldman Sachs in the early 2000s before being listed in 2014. Activists filled out the shareholder register and the company eventually was acquired by the private equity group MBK at a stake worth $ 760 million in 2016.
Fortress has agreed to pay MBK an enterprise value of 400 billion yen (3.5 billion yen) which includes about 232 billion yen in debt, according to a person familiar with the matter. The group has already received inquiries from renewable energy and logistics companies about the possible use of some of the land in Accordia’s portfolio, the person added.
Fortress’s big bet, which manages around $ 54 billion in assets, comes as the number of operating golf courses in Japan continues to decline that began nearly two decades ago.
Golf activity in the country, the world’s fastest aging large economy, depends on the growing number of active and financially well-off retirees, offsetting the drying up of the pipeline of young players and corporate outings.
In its most recent research on the leisure industry in Japan, the Japan Productivity Center, a nonprofit organization and research group, estimated that 5.2 million people have played golf in Japan at least once. in 2020, a decrease of 10.3% compared to the previous year. Accordia estimates that its average customer plays 2.7 times per year, and that 11.7 million rounds have taken place in its portfolio in 2020.
The person close to the deal said the central attraction of the deal was Accordia’s high cash generation, dominant market share and high profitability of 1.5-2% of annual revenue growth. business before Covid.
But another person familiar with the sale said that would not be enough to justify the high price charged by MBK. The company has had talks with at least six of the world’s largest private equity groups, half of which immediately gave up. Fortress was the only company to make a formal offer in the second round, the person said.
The closure of Japanese courses, many of which were built in the 1980s and bill themselves as eccentric trophies from the country’s bubble era, has seen phases in recent years, with courses either bankrupted or converted to solar farms at the rate of about one per week.
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When MBK bought Accordia, the company was running 135 Japanese language courses and planned to grow with a business model that used economies of scale and targeted facilities near urban centers. The company now offers 169 courses, or 7.6% of the total in Japan.
Fortress tapped into Japan’s pre-Covid tourism industry following its acquisition of hotel operator Mystays Hotel Management in 2012. Its hotel portfolio includes 159 hotels, with the group seeking more acquisitions as the industry is recovering with the recent lifting of restrictions on Covid-19.
Accordia said she hoped to capitalize on Fortress’s hotel portfolio to grow her golf business.