Brookfield Asset Management Inc. agreed to buy a majority stake in Oaktree Capital Group LLC, a combination that would rival Blackstone Group LP as the world’s largest alternative money manager.
Brookfield will acquire a 62 percent stake in Oaktree in a cash and stock deal worth roughly $4.7 billion, the companies said Wednesday in a statement. The firms together will have about $475 billion of assets under management and $2.5 billion of annual fee-related revenue, according to the statement. Blackstone had $472 billion of assets at year-end.
The deal will bolster the credit business of Brookfield, which has traditionally focused on real estate. It also provides Oaktree, a specialist in distressed debt, exposure to assets that thrive outside turbulent economic times. The transaction enables the Toronto-based firm to broaden its product offerings, especially as the world’s largest institutional investors look to allocate billions of dollars to fewer firms, Brookfield Chief Executive Officer Bruce Flatt said in a phone interview.
“We obviously mesh importantly both culturally and in terms of product lines without competing and overlapping,” Oaktree co-Chairman Howard Marks said in the interview.
“We had difficulty, up until now, meeting the strict terms of some of those mandates,” Flatt said. “Very few firms in the world are able to do that.”
Brookfield will acquire all Oaktree shares for $49 in cash or 1.077 Brookfield shares, a 12.4 percent premium as of March 12, according to the statement.
Oaktree rose as much as 13 percent, the biggest gain since the company went public in 2012. Brookfield fell 0.3 percent to $45.85 at 11:22 a.m. in New York.
Brookfield, founded 120 years ago, is Canada’s largest alternative investment firm and owns companies ranging from real estate to infrastructure and renewable power. Iconic holdings include Manhattan West, the new complex at New York’s Hudson Yards, and Brookfield Place near Wall Street.
In the past year the firm acquired mall owner GGP Inc. for $13 billion, Forest City Realty Trust for $6.7 billion and a power-solutions business from Johnson Controls for $13.2 billion.
Shares of Brookfield have been a stellar performer for decades, posting a 21 percent annual return since 2009, double the gain of the S&P/TSX Composite Index, Canada’s main equity gauge.
Marks, Bruce Karsh and other partners founded Los Angeles-based Oaktree in 1995. The firm managed $120 billion in distressed debt, private equity holdings, real estate, infrastructure and other equity assets as of Dec. 31. It has returned 78 percent since its initial public offering.
Under the terms of the deal, Brookfield could take over full ownership of Oaktree by 2029. The companies will continue to operate independently, with each keeping its brand and led by existing management. Marks will join Brookfield’s board.
Perella Weinberg Partners was the sole financial adviser and Simpson Thacher & Bartlett and Munger, Tolles & Olsen were legal advisers to Oaktree. Weil, Gotshal & Manges and Torys represented Brookfield.
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