Brookfield to buy controlling stake in Oaktree

13 March 2019 - 12:00 am UTC

Brookfield Asset Management has agreed to acquire a 62% stake in Oaktree Capital, an asset manager with around USD 2.4bn in infrastructure assets, the firms announced.

The roughly USD 4.7bn deal will make Brookfield one of the world’s largest asset managers, giving the firm approximately USD 475bn in assets under management and USD 2.5bn of annual fee-related revenues, according to the 13 March press release.

The transaction will also increase Brookfield’s infrastructure portfolio. Oaktree is nearing final close on its USD 1.5bn transportation fund, which had made an initial USD 450m investment in Kansas-based transportation business, Watco Companies, in January. The fund also committed USD 100m to a business aviation infrastructure platform. In 2014, Oaktree bought Highstar Capital, a New York-based infrastructure investment firm.

While Brookfield will acquire all of Oaktree’s Class A units, the latter’s unitholders will be paid either USD 49 per share in cash or 1.0770 Brookfield Class A shares. Brookfield can up its interest to 100% by 2029 according to an agreed upon liquidity schedule. Cash for the deal will come from Brookfield’s available liquidity.

Brookfield and Oaktree will continue to be run independently, the firms said, with each respective management team remaining in place.

The deal must still be approved by a majority of Oaktree’s Class A unitholders, but co-chairmen Howard Marks and Bruce Karsh control roughly 92% of the company’s voting interests and have agreed to vote all their units in favor of the deal. The sale is expected to close 3Q19.

Marks will continue as co-chairman of Oakstree, but will also join Brookfield’s board. Oaktree’s Bruce Karsh will continue as co-chairman and chief investment officer, according to the press release.

Oaktree’s stock closed the day trading at USD 49.24 per share, up 12.50% on the day. BAM’s stock stands at USD 46.42 per share, up nearly 1% from the previous day’s close.

Perella Weinberg Partners served as Oaktree’s financial advisor, while Simpson Thacher & Bartlett and Munger, Tolles & Olsen acted as the firm’s legal advisor. Sandler O’Neill & Partners (financial) and Mayer Brown (legal) advised the Special Committee of Oaktree’s Board of Directors. Weil, Gotshal & Manges and Torys acted as Brookfield’s legal advisors.

Oaktree’s infra platform

Oaktree’s infrastructure fund has seen some starts and stops in recent years. The fund was initially set to target both transportation and energy investments, but in 2017 the firm decided it would instead split out a USD 2bn transportation fund and a USD 1bn energy strategy. Oaktree later dropped its plans for an energy infrastructure fund.

Highstar’s portfolio includes Wildcat Midstream Partners, a Dallas-based midstream company, and Caiman Energy, another midstream firm focused on the Utica Shale.

 

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