Billionaires worldwide are now lining up to take their companies private

Topics billionaires | SoftBank

Anil Agarwal proposed in May to buy out minority shareholders of his flagship commodities firm Vedanta Ltd
Move over, private equity: There are some new buyers in town, and they know their targets better than anyone.

Billionaire owners from Japanese tycoon Masayoshi Son to French media magnate Patrick Drahi are looking at removing their crown jewels from the spotlight of public markets. The potential moves to take their firms private mean they won’t have to deal with volatile markets and increasingly vocal shareholders.

Companies have already announced $26 billion of transactions to be taken private by a related party this year, up about 2,500% from the same period in 2019, according to data compiled by Bloomberg. Many of the deals involve ultra-rich founders who have been helped by cheap financing and the sluggish share performance of their businesses at a time when the broader market is surging.

“While we have seen more companies deciding to stay private for longer in the last couple of years, we are also witnessing a trend where public companies are looking to go private,” said Isabelle Toledano-Koutsouris, head of private capital markets for Europe, the Middle East and Africa at UBS Group AG. “This has been in the making in the last few months given the market volatility resulting from the pandemic.”

Son, the chairman of SoftBank Group Corp, is revisiting the idea of a management buyout of the Japanese conglomerate, according to people with knowledge of the matter. The deliberations reflect continued frustration at the gap between the company’s $126 billion market capitalization and the value of its sprawling investment portfolio. On Friday, Drahi offered 2.5 billion euros ($3 billion) to buy the shares he doesn’t already own in telecommunications provider Altice Europe NV.

The activity comes less than two weeks after German startup factory Rocket Internet SE announced plans to withdraw its shares from the Frankfurt and Luxembourg bourses. The company, backed by the billionaire Samwer brothers, said a stock-market listing is no longer the best way to raise money and it can rely on private funding for future expansion.

Wealthy individuals are pursuing these deals at a time when overall dealmaking activity remains in the doldrums, with the value of mergers and acquisitions down 33% in 2020, according to data compiled by Bloomberg. Private equity firms, the traditional buyers for out-of-favor assets, have largely stayed on the sidelines: investments have fallen 15% this year despite record amounts of dry powder.

Hong Kong Tycoons

The trend has also caught on in Asia, where some of the most well-known companies are going into private hands. Indian billionaire Anil Agarwal proposed in May to buy out minority shareholders of his flagship commodities firm Vedanta Ltd.

In recent months, Hong Kong property magnate Peter Woo completed a privatization of Wheelock & Co., one of the city’s largest developers, after offering investors a 52% premium. The century-old Li & Fung Ltd., the world’s biggest consumer-goods supplier, was also delisted following a buyout bid from its founding family.

“It makes financial sense now to look at going private if your stock prices are trading lower,” UBS’s Toledano-Koutsouris said. “Staying private gives you more flexibility in executing your plans, and more runway to do it.”


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