Brookfield buys most of Oaktree to build giant to rival to Blackstone
The combined businesses will have about $475bn of assets under management, more than industry leader Blackstone had at the end of 2018
New York/Bengaluru— Brookfield Asset Management said on Wednesday that it will buy most of Oaktree Capital Group in a roughly $4.8bn deal, creating an alternative asset manager that will rival industry leader Blackstone Group in size.
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 about 13% over the past 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% over the same time and Blackstone’s share price is up 4%.
Brookfield approached Oaktree about the deal some time during the autumn, a person familiar with the matter said.
The deal is also 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 about 70% 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 CEO Bruce Flatt said in a statement.
The combined businesses will have about $475bn of assets under management, Brookfield said in a statement. Industry leader Blackstone had $472bn in assets under management at the end of 2018.
Oaktree shareholders can exchange each of their shares for either $49 in cash or 1.0770 Class A shares of Brookfield. However, Brookfield said the total amount will be paid in 50% stock and the rest in cash. The offer represents an 11.8% premium to Oaktree’s Tuesday closing price. The stock was up 11.8% in mid-day trading.
Both companies will continue to operate as independent businesses, while Marks, Oaktree’s co-chair, will join Brookfield’s board of directors.
Oaktree shareholders, consisting primarily of its founders, certain members of management and employees, will own the remaining 38% of the company.
Starting from 2022, Oaktree’s founders, senior management, as well as current and former employee shareholders, will be able to sell their remaining Oaktree units to Brookfield over time.