Brookfield buys most of Oaktree to build juggernaut to rival Blackstone: Reuters


Photo courtesy of Reuters/Mark Blinch

Brookfield Asset Management said on Wednesday it will buy most of Oaktree Capital Group in a roughly US$4.8 billion deal, creating an alternative-asset manager that would 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 under-performed 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 same time and Blackstone’s share price is up 4 percent.

Toronto-based Brookfield approached Los Angeles-based 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 US$3.3 billion in 2017.

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 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 US$475 billion of assets under management, Brookfield said.

Industry leader Blackstone had US$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 US$650 billion, a firm spokesman said.

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

The offer represents an 11.8 percent premium to Oaktree’s Tuesday closing price. The stock was up 11.8 percent in mid-day trading.

Both firms 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, 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.

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

(This story has been edited by Kirk Falconer, editor of PE Hub Canada)

Take your pick!

  • Buyouts delivers exclusive news and analysis about private equity deals, fundraising, top-quartile managers and more. Get your FREE trial or subscribe now.
  • VC Journal provides exclusive news and analysis about venture capital deals, fundraising, top-quartile investors and more. Get your FREE trial or subscribe now.