SoftBank-backed Fortress pays $3.5bn for Japan golf company
Investment group acquires Accordia after global private equity firms balk at price
The SoftBank-backed investment group Fortress has laid a $3.5bn bet on the role of golf and hotels in Japan’s post-Covid recovery after sealing a deal that the world’s biggest private equity firms shunned as too expensive.
Fortress has bought Accordia Golf, Japan’s largest portfolio of golf courses that was initially assembled by Goldman Sachs in the early 2000s before being listed in 2014. Activists populated the shareholder register and the company was eventually bought-out by private equity group MBK at an equity value of $760m in 2016.
Fortress has agreed to pay MBK an enterprise value of ¥400bn ($3.5bn) that includes about ¥232bn in debt, according to a person close to the deal. The group has already received inquiries from renewable energy and logistics companies over possible use of some of the land sitting in the Accordia portfolio, the person added.
The large wager by Fortress, which manages about $54bn in assets, comes as the number of working golf courses in Japan continues a decline that began almost two decades ago.
The business of golf in the country, the world’s fastest-ageing big economy, depends on the increasing number of active and financially comfortable retirees offsetting the drying pipeline of younger players and corporate days out.
In its most recent research on Japan’s leisure sector, the Japan Productivity Center, a non-profit organisation and research group, estimated that 5.2m people played golf in Japan at least once in 2020 — down 10.3 per cent from the previous year. Accordia estimates that its average customer plays 2.7 times a year and that 11.7m rounds occurred across 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 to 2 per cent in annual top-line growth pre-Covid.
But another person familiar with the sale said this would not be enough to justify the high price tag demanded by MBK. The firm held discussions with at least six of the world’s biggest private equity groups, half of which walked away immediately. Fortress was the only company to table a formal bid in the second round, the person said.
The closure of Japanese courses, many of which were built in the 1980s and stand as eccentric trophies of the country’s bubble era, has gone through phases in recent years, with courses either going out of business or being converted into solar farms at the rate of roughly one per week.
When MBK bought Accordia, the business operated 135 Japanese courses and planned to expand with a business model that used economies of scale and targeted facilities close to urban centres. The company now has 169 courses, or 7.6 per cent of the total in Japan.
Fortress tapped into Japan’s surging pre-Covid tourism industry following its acquisition of hotel operator Mystays Hotel Management in 2012. Its hotel portfolio includes 159 hotels, with the group looking for more acquisitions as the industry recovers with the recent lifting of Covid-19 restrictions.
Accordia said it hoped to capitalise on Fortress’s hotel portfolio to expand its golf business.