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MarketScreener Homepage  >  Equities  >  Toronto Stock Exchange  >  Brookfield Asset Management    BAM.A   CA1125851040

BROOKFIELD ASSET MANAGEMENT

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Brookfield to buy most of Oaktree to build juggernaut to rival Blackstone

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03/13/2019 | 11:50pm EDT
People walk to Brookfield Place off Bay Street on the day of the AGM for Brookfield Asset Management shareholders in Toronto

(Reuters) - Brookfield Asset Management Inc said on Wednesday it will buy most of Oaktree Capital Management in a roughly $4.8 billion deal, creating an alternative-asset manager that will challenge the likes of industry giant Blackstone Group.

The decision by Oaktree, led by distressed debt investor Howard Marks, to sell a majority stake of itself comes after a sustained period in which its stock has underperformed the broader market.

Oaktree's stock is down around 13 percent in the last five years, even after a price bump on Wednesday following the deal's announcement. By comparison, the S&P 500 Index is up more than 50 percent over the period and Blackstone's share price is up 4 percent.

Brookfield approached Oaktree about the deal sometime during the fall season, a person familiar with the matter said.

Oaktree is the second U.S. alternative-asset manager to sell itself in recent years, since Fortress Investment Group agreed to be acquired by Japan's SoftBank Group Corp for about $3.3 billion in 2017.

The deal is a bet by Brookfield, which currently focuses on private equity, real estate, infrastructure and renewable power, on the prospects for investing in debt, which makes up around 70 percent of Oaktree's assets under management.

"This transaction enables us to broaden our product offering to include one of the finest credit platforms in the world, which has a value-driven, contrarian investment style, consistent with ours," Brookfield Chief Executive Bruce Flatt said in a statement.

The combined businesses will have about $475 billion of assets under management, including debt, Brookfield said.

Industry leader Blackstone had $472 billion in assets under management at the end of 2018, though this does not include debt. Including debt, Blackstone's assets under management would be at least $650 billion, a firm spokesman said.

Oaktree shareholders can exchange each of their shares for either $49 in cash or 1.0770 Class A shares of Brookfield. Brookfield said the total amount will be paid in 50 percent stock and rest in cash.

The offer is a premium of 12.4 percent per Oaktree Class A unit to Tuesday's closing price, Brookfield said in a statement. The stock was up 12.2 percent in mid-afternoon trade.

Both companies will continue to operate as independent businesses, while Marks, Oaktree's co-chairman, would join Brookfield's board of directors.

Oaktree shareholders, consisting primarily of its founders, certain members of management and employees, will own the remaining 38 percent of the company.

Starting from 2022, the remaining shareholders will be able to sell their remaining Oaktree units to Brookfield over time.

(Reporting by Joshua Franklin in New York and Debroop Roy in Bengaluru; editing by Arun Koyyur, Shinjini Ganguli and Steve Orlofsky)

By Joshua Franklin and Debroop Roy

Stocks mentioned in the article
ChangeLast1st jan.
BROOKFIELD ASSET MANAGEMENT -1.17% 61.63 Delayed Quote.17.79%
DJ INDUSTRIAL -1.77% 25502.32 Delayed Quote.9.32%
NASDAQ 100 -2.23% 7326.056662 Delayed Quote.18.38%
NASDAQ COMP. -2.50% 7642.666882 Delayed Quote.18.14%
OAKTREE CAPITAL GROUP LLC -0.77% 49.12 Delayed Quote.23.57%
S&P 500 -1.90% 2800.71 Delayed Quote.11.72%
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Financials ($)
Sales 2019 57 875 M
EBIT 2019 9 466 M
Net income 2019 -
Debt 2019 -
Yield 2019 1,46%
P/E ratio 2019 71,17
P/E ratio 2020 71,06
Capi. / Sales 2019 0,79x
Capi. / Sales 2020 0,81x
Capitalization 45 627 M
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Number of Analysts 4
Average target price 46,8 $
Spread / Average Target 2,0%
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Managers
NameTitle
James Bruce Flatt Chief Executive Officer & Director
Frank J. McKenna Chairman
Lori Pearson Chief Operating Officer & Senior Managing Partner
Brian Douglas Lawson Chief Financial Officer & Senior Managing Partner
Jeffrey Miles Blidner Director & Vice Chairman
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