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By: Maddy Ozer | meo14@psu.edu | March 15, 2019
On Wednesday, March 13, Bruce Flatt, the head of Toronto’s Brookfield Asset Management (BAM) , released a deal to buy majority stake of Oaktree Capital Management (OAK), a Los Angeles-based company in distressed-debt investing. Brookfield will buy about 62% of the Oaktree business, acquiring all outstanding shares of its publicly traded common stock for $49 in cash, or 1.077 Brookfield shares. Oaktree’s preferred shareholders, which primarily consist of its co-chairmen, Howard Marks and Bruce Karsh, co-founders and other management and employees, will also sell 20% of their non publicly traded preferred shares to Brookfield for the same price. At the end of this deal, Oaktree’s stockholders will own about 38% of the firm. Both companies will continue to operate independently of one another.
Brookfield’s real estate estimates to be $188 billion in city skylines all over the world. Its infrastructure holdings of pipelines, ports, data centers and toll roads combines to be $61 billion in assets, and there is no bigger owner of solar, wind and hydropower plants than Flatt’s $47 billion renewables business. Additionally, over the past year, almost no one has competed with Brookfield’s private equity deal-making pace, and when you add the $350 billion that Brookfield oversees to Oaktree’s $120 billion scope across credit markets, Flatt’s closest peer on Wall Street is billionaire Stephen Schwarzman, the leader of Blackstone Group with $472 billion in assets.
I feel this is a smart and extremely savvy deal for Brookfield. Their intentions are to add a credit-investing capability to their business portfolio, and they understood that the fastest and most efficient way to do this was to invest in Oaktree. According to Flatt, “When you look at Oaktree, it has a similar value orientation to investing as us. Our mindset is the same, but they offer products in credit that are different than ours. We could have built a credit business on our own, but it would have taken 15 years to build what Oaktree has.” The key to the success of these businesses is that they both are run by similar people with similar visions. As they both continue to grow and create a one-stop offering of top quality alternative strategies, they will become more and more appealing to customers in the long run.
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Sources:
https://www.wsj.com/articles/brookfield-asset-management-to-buy-62-of-oaktree-capital-11552488375?mod=searchresults&page=1&pos=15
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