UPDATE 1-Lone Star set to quit Japan golf business

Wed Oct 26, 2011 5:17am EDT

By Junko Fujita

TOKYO Oct 26 (Reuters) - U.S. private equity firm Lone Star will sell its entire stake in PGM Holdings , one of Japan's largest golf course operators, for 39.5 billion yen ($521 million) as it seeks to exit one of its largest investments in distressed assets in Japan.

Lone Star has agreed to sell its 64 percent stake to Japanese "pachinko" pinball machine maker Heiwa Corp , the manufacturer said. Heiwa will offer 52,000 yen per share for PGM Holdings, a 30 percent premium on Wednesday's closing price of 39,850 yen.

The offer price is far below the company's historical high of 301,000 yen marked in January 2006, a few months after PGM went public.

Heiwa will launch a tender offer to also buy shares from other shareholders but it plans to keep PGM, which Lone Star took public in 2005, as a listed company, Heiwa chief executive Yasuhiko Ishibashi said at a media briefing.

Separately, PGM said Heiwa would launch a tender offer to take control of it. An official at Lone Star's Tokyo office said it was not making any comment on the sale.

Lone Star's decision follows a similar move by Goldman Sachs , which earlier this year sold its stake in Accordia Golf , another golf course operator which competes against PGM.

Lone Star and Goldman snapped up a string of failed golf courses in Japan following the bursting of Japan's asset bubble in the early 1990s. They turned the businesses around and sold shares in the companies in initial public offerings to reap profits.

Lone Star's exit from the golf business follows its sale of two office buildings and a hotel in central Tokyo to Mitsubishi Estate earlier this year. The U.S. fund has also put on sale another Tokyo property, an office and banquet hall complex.