Oaktree Winner: It’s Knight

Who’s the big winner in Oaktree Capital Management’s sale of a 14% ownership position for approximately $800 million? Goldman Sachs, which is using the deal as a pilot for its new private market? Nope. Try the John S. and James L. Knight Foundation.

Back in early 2004, the Knight Foundation led an investor group that purchased a 5% stake in Oaktree – which at the time was reported to be valued at between $500 million and $750 million. Knight only had $1.7 billion at the time, but got pole position due to its steady support of both Oaktree and Trust Company of the West (from which the Oaktree principals spun out in 1995). The group included five other buyers, including Penn State.

Knight experienced some serious turmoil over the next couple of years, including a decision to effectively can its in-house investment staff – and outsource those responsibilities to Cambridge Associates. But it maintained its close relationship to Oaktree, and last December exercised an option that increased the consortium’s ownership position to 11.81 percent. It’s unclear what triggered the option, or what Knight, et. all had to pay for the extra 6.81 percent.

Which brings us to Oaktree’s recent “IPO” (initial private offering) on Goldman Sachs’ new exchange.

The deal valued Oaktree at approximately $5.5 billion, which is at least a 7x multiple on the value when Knight originally bought in — and perhaps as high as 10x. I’d also assume the $5.5 billion is above whatever valuation was tied to the option trigger.

The Knight-led consortium did not sell out entirely via the offering, but instead participated pro rata alongside all other Oaktree shareholders. That means that it raked in around $95 million from the sale, and still holds a position theoretically valued at more than $550 million. 

Not too shabby for an investment made just three years ago…