A source told Bloomberg that the government of Osaka has canceled the sale of its commuter rail line after Lone Star Funds was rejected as the winning bidder by lawmakers in the Western Japan prefecture. The sale was supposed to be worth JPY 78.1 billion or $760 million. Lone Star Funds is a private equity firm investing in distressed assets globally.
The person who is knowledgeable about the matter said there is no decision yet from the government if another auction of Osaka Prefectural Urban Development Co will be held. The source spoke on the condition of anonymity since the matter is confidential.
Citing a webcast of the tally, the report said 53 of the 104 assembly members voted against the offer of Lone Star to purchase the railway and logistics firm owned by the state. The firm is the operator of the Semboku Rapid Railway, an Osaka commuter line that utilized by over 50 million people each year.
The termination of the sale came after officials in cities like Sakai which are trailed by the Semboku line said the promise of the private equity firm to reduce the transit fee by JPY 10 was not sufficient, the report said. Last month, a government committee picked Lone Star as the winning bidder. The Dallas, Texas-based company beat bids from two other firms, Fortress Japan Investment Holdings and Nankai Electric Railway Co.
The report quoted NLI Research Institute Chief Economist Yasuhide Yajima, who said, "One concern is that investors could pull back from future investment opportunities in Osaka's infrastructure assets and shift more of their focus back to Tokyo, which is getting the spotlight as the host of the 2020 Olympics Games."
Founded by John Grayken, Lone Star promised to improve the profitability of Osaka Prefectural Urban Development and enhance its services. Citing a statement last month from the government of Osaka, the report said the private equity company intended to exit the firm after five years through an initial public offering.
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