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Fortress Investment Buys Back Shares From Nomura

NEW YORK (The Deal) -- Fortress Investment Group (FIG - Get Report) has said it bought back Japanese investment bank Nomura Holdings' 12% stake in itself for $363.4 million.

The New York-listed private equity and hedge fund group said on Thursday, Feb. 13, it paid $6.00 per share for the holding, which Nomura first acquired in 2006.

Fortress added that both companies had "recommitted" to a strategic and mutually beneficial business relationship which had supported its growth in Asia.

Nomura, which reportedly made a $205 million gain on the deal, compared with the ¥16 billion ($158 billion) carrying value of the stake at the end of December.

But the exit, after eight years, took place at a discount of $1.99 per share to Fortress' closing price on Wednesday of $7.99. The shares closed at $8.47 on Thursday. It was also at a much bigger discount to the $888 million, or $16.12 per share, which Nomura paid when it bought what was then a 15% holding in Fortress before the group's 2007 flotation. (Nomura's stake has been diluted in the interim by the initial public offering and Fortress' subsequent capital raisings, but it has not previously sold any part of its holding). Fortress' shares are still almost exactly $10 a share below its IPO price of $18.50.

Nomura has been cutting back its overseas profile for the past 18 months, reversing much of the international expansion it pushed through during the past decade in an ill-fated attempt to join the bulge bracket of global investment banks. At the time, however, the Tokyo lender was following a fashion for investment banks to take a stake in hedge fund managers. Shortly before Nomura's December 2006 deal with Fortress, Merrill Lynch & Co. had bought a small stake in DiMaio Ahmad Capital LLC, while Morgan Stanley bought into four hedge funds, including Lansdowne Partners Ltd., FrontPoint Partners LLC, Avenue Capital Group and Brookville Capital Management LP.

The sale of the Fortress stake did little to support Nomura's share price. The stock lost 2.2% in Tokyo on Friday to close at 681 yen, while overall the Nikkei 225 index fell by more than 1.5%.

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