* Lone Star had bid some $755 mln for the railway firm
* Lost local govt vote by a narrow margin
* Osaka govt to take fresh look at whether to sell or not
By Junko Fujita
TOKYO, Dec 16 Lone Star Funds' $755 million bid
to buy an Osaka-based train and warehouse operator was blocked
by a municipal government on Monday, derailing what would have
been a big comeback acquisition for the U.S. private equity firm
The vote came out against Lone Star by a narrow margin, 53 to
51. While no official reason was given, some local assembly
members had voiced concerns before the vote that firms with a
public remit like railways should not be sold to funds with a
short-term investment horizon.
Lone Star's track record in Japan has been one of quickly
exiting its investments after only a few years.
The vote also underscored the difficulties private equity
has had in Japan in winning high-profile deals.
"Basically, in Japan private equity is treated like a
second-class citizen and people think that corporate
restructuring should be done by banks," said Yasushi Ando, chief
executive of domestic private equity firm New Horizon Capital
Lone Star, a distressed asset investment specialist, last
month won the right to buy the Osaka Prefectural Urban
Development Co for 78 billion yen, 16 percent higher than a
target price set by the local government and outbidding its
closest rivals Nankai Electric Railway Co and Fortress
Other bidders included J-Will Partners Co, CVC Asia Pacific
Ltd and Goldman Sachs.
Osaka prefecture owns 49 percent the company while Osaka Gas
Co, Kansai Electric Power Co and Japanese
banks including Resona Holdings Inc own the rest.
A representatives for Lone Star declined to comment.
An Osaka prefecture official told Reuters the local
government will take a fresh look at whether or not to sell the
Lone Star raised about $7 billion for its Lone Star Real
Estate Fund III in October with part of the money aimed at
investments in Japan.
Past investments in the country by the Dallas-based firm
include Tokyo Star Bank, distressed golf courses and hotels. In
2009, Lone Star's planned takeover of a failed Japanese real
estate investment trust, New City Residence Investment Corp, was
blocked by creditors unhappy with the terms offered.
The fund has been quiet in Japan in recent years as the
economy stagnated but signs of a recovery on the back of
aggressive measures taken by Prime Minister Shinzo Abe have
helped rekindle interest in the country.