Recent U.S. regulatory developments surrounding Mubadala Investment Company’s planned majority acquisition of Fortress Investment Group may herald the arrival of a new avenue for U.S. institutional investors to access attractive co-investment opportunities via strategic relationships with non-U.S. investors.
The Mubadala/Fortress Investment Group transaction. According to news reports, in May 2023, Mubadala Investment Company, an Abu Dhabi sovereign wealth fund, agreed to a transaction with Softbank that would lead to Mubadala holding 70% of U.S.-based Fortress equity, with Fortress management holding the other 30%. However, since that time, Mubadala entered into discussions with several potential co-investors—including a university, Brazil’s BTG Pactual, and certain U.S. pension funds—in an apparent effort to reduce Mubadala’s expected equity stake in Fortress. The impetus for these changes is widely believed to be Mubadala’s desire to address concerns raised by the U.S. Committee on Foreign Investment in the United States (CFIUS) about the transactions.
In May 2024, following lengthy negotiations, CFIUS cleared the transaction without the addition of any co-investors. However, Mubadala reportedly was required to make important concessions, including waiving day-to-day control of Fortress, and committing to keep U.S. technology and data in the United States. Although CFIUS ultimately approved the transaction without a U.S. institutional co-investor, the fact that the parties and CFIUS considered such an arrangement a feasible mitigation option is a new development in the CFIUS space that is worthy of close attention going forward.
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