TOKYO U.S. distressed asset investor Lone Star Funds has won the right to buy the Osaka Prefectural Urban Development Co, half-owned by Japan's Osaka prefecture, for 78 billion yen ($783 million), two people with direct knowledge of the transaction told Reuters on Wednesday.
Lone Star outbid its peer, Fortress Investment Group (FIG.N), and a local railway company, Nankai Electric Railway Co (9044.T), to buy the company that runs train lines and a commercial trucking distribution center, the sources said.
The price Lone Star offered was 16 percent higher than the target price of 67 billion yen set by the Osaka prefecture, indicating a strong appetite.
The deal, if completed, will be the first high-profile acquisition by the U.S. company since it was one of the most active funds in Japan following the bursting of the country's asset bubble in the early 1990s.
Dallas-based Lone Star then bought a failed bank, distressed golf courses, hotels and other assets, turning the businesses around fairly quickly and either selling them to other buyers or listening them on the market.
Last month Lone Star, together with other shareholders, sold a Tokyo-based regional bank, Tokyo Star Bank, to Taiwan's CTBC Financial Holding Co Ltd (2891.TW) for 52 billion yen, two years after they took control in 2011.
Lone Star is seen as a short-term investor, while in the sale document Osaka prefecture has requested a potential buyer hold the business for five years.
The divestment of the company, better known as OTK, is part of a privatization strategy by Osaka prefecture. Osaka prefecture owns 49 percent stake in the company while Osaka Gas Co (9532.T), Kansai Electric Power Co (9503.T) and Japanese banks including Resona Holdings Inc (8308.T) own the remaining 51 percent.
Its status as a private-public partnership dates back to the 1960s when the previous private developer of a rail line ran into business difficulties.
Osaka Prefecture plans to complete the transaction as early as January.
($1 = 99.5550 Japanese yen)
(Editing by Shinichi Saoshiro and Matt Driskill)