By Liz Hoffman, Jenny Strasburg and Sarah Krouse
SoftBank Group agreed to buy asset manager Fortress Investment Group LLC for $3.3 billion, in a surprising move that is part of an effort by the Japanese technology giant to transform itself into one of the world’s largest investment firms.
Fortress Class A stockholders are to get $8.08 a share, the companies announced late Tuesday after The Wall Street Journal reported on the deal. That is 39% above the closing price Monday, excluding dividends. The shares surged by about 6% Tuesday before word of the acquisition surfaced.
The move took some SoftBank watchers by surprise. The company, run by Masayoshi Son , one of the best-known and most-colorful Japanese businessmen, is known for bold acquisition moves in the technology and communications arena. In September, for example, SoftBank purchased ARM Holdings PLC, a U.K. designer of microprocessors, for about $32 billion ; in 2013, it acquired control of U.S. mobile-phone carrier Sprint Corp.
The Fortress acquisition nonetheless fits Mr. Son’s ambitious long-term plans to become one of the world’s biggest asset managers, focusing on technology but with a broader platform to raise money and shepherd companies across different sectors. In a statement, Mr. Son said the acquisition, along with a gigantic investment fund he’s creating, will speed up a transformation aimed at long-term growth.
Mr. Son is spearheading the $100 billion fund to help put his company and investors at the forefront of emerging technologies such as artificial intelligence and the Internet of Things, in which everyday objects such as thermostats, watches and cars are connected online.
The deal will make SoftBank one of the biggest alternative asset managers in the world. Fortress, which is listed on the New York Stock Exchange, manages about $70 billion in assets and invests in real estate, credit and private equity. The firm was founded in 1998 and is led by Chief Executive Randy Nardone, who, along with Pete Briger and Wes Edens, will continue to lead Fortress.
The firm will continue to operate independently within SoftBank and be based in New York.
So-called alternative-asset managers like Fortress have emerged as appealing targets to some in part because they are able to charge higher fees and typically require long-term investments from backers. Revenue at traditional money management firms has been squeezed in recent years by the growing popularity of low-cost index-tracking funds and a difficult environment for stock pickers.
SoftBank gains a global network of investors that could help it find and structure deals. It also picks up an asset-management back office—compliance, legal and other functions—that could help as it builds out its own investing business.
SoftBank believes it can double Fortress’s assets in the next few years, partly by shopping its funds to Mr. Son’s network of sovereign funds and global billionaires, according to people familiar with the matter. It plans to sell a slice of Fortress’s operating unit, known as the general partner, to some in that network, the people said.
Fortress was the first U.S. hedge-fund manager to sell shares to the public, in early 2007. Its public offering raised more than $600 million at a frothy time in the markets and when hedge-fund assets were swelling. It valued the company at more than $7 billion, with the shares debuting at $35 each—almost double their offering price and well above what it is selling for now.
The IPO was billed as a move toward ‘democratizing’ hedge- and private-equity funds, which have long been reserved for the wealthy and big institutional investors such as pension funds.
But Fortress’s shares soon slid as the financial crisis broadly hit the returns of private investment funds.
Today it is one of many publicly traded U.S. asset management firms, including several focused on so-called alternative asset classes. Fortress shares have had a boost in recent months as some financial stocks gained ground. They were up 28% so far this year and rose 25% after hours to $7.75.
Despite recent success in credit investing, Fortress hasn't been immune from a yearslong slump in hedge-fund performance. The firm in recent years shut down a fund that bet on global macroeconomic shifts, though it still has a credit business. In addition to its alternative strategies, Fortress also owns Logan Circle Partners, a fixed-income investing unit.
Foreign investors, particularly from Asia, have been shopping for financial-services assets in the U.S. in recent years. Singapore-based Shanda Group, which bought a stake in Legg Mason Inc. last year, has said it plans to increase that position to 15% from 10%, for example.
London-based bankers Nizar Al-Bassam and Dalinc Ariburnu, of investment firm F.A.B. Partners, helped arrange Tuesday’s deal and are advisers to SoftBank’s new investment vehicle, known as the Vision Fund. Messrs. Al-Bassam and Ariburnu previously worked with the head of the fund, Rajeev Misra , at Deutsche Bank /zigman2/quotes/203042512/composite DB +1.49% AG. Mr. Misra worked at Fortress for less than a year before he joined SoftBank in 2014.
The F.A.B. bankers since December have been working on the Fortress deal, according to a person familiar with the matter. SoftBank executives and their advisers have internally discussed a target for doubling Fortress’s assets in the next three years.
Corrections & Amplifications
SoftBank purchased ARM Holdings for $32 billion in September. An earlier version of this article misstated the price.