An agreement between the two will see Brookfield, which closed its inaugural infrastructure debt fund early last year, take a 62 percent stake in Oaktree, which closed its own real estate debt vehicle on $2.1 billion last October.
Toronto-headquartered Brookfield will pay $49 cash per class A share, of 1.0770 class A Brookfield shares, a premium of 12.4 percent over the firm’s closing share price on 12 March 2019 and a 15.9 percent premium on the 30-day volume-weighted average. The total consideration will be 50 percent cash and 50 percent shares.
Between them the two companies have assets under management of $475 billion and fee-related revenues of $2.5 billion and the deal will create one of the largest alternative asset managers in the world.
The two businesses will continue to operate independently, a statement from Brookfield said, and would each operate under their existing brands and be led by their existing management teams. Oaktree’s co-chairman, Howard Marks, will join the board of directors at Brookfield.
The remaining 38 percent of Oaktree will be owned by Oaktree Capital Group Holdings unitholders, predominantly made up of Oaktree’s founders and other members of management and employees.
From 2022, former employee unitholders will be able to sell their Oaktree units to Brookfield over time through an agreed liquidity schedule, as will Oaktree’s founders, management and current employee unitholders. Under this scheme, the earliest Brookfield could own 100 percent of Oaktree would be 2029.
The deal comes almost a year since Brookfield acquired a 25 percent stake in Link Financial Group, the pan-European loan servicing platform which is a sister company of credit manager LCM Partners. The deal is intended to allow the platform to grow internationally and includes a clause allowing Brookfield to build up its stake to 49.9 percent over time.
Perella Weinberg Partners acted as sole financial advisor while Simpson Thacher & Bartlett and Munger, Tolles & Olsen acted as legal advisors to Oaktree on the Brookfield deal. Brookfield received legal advice from Weil, Gotshal & Manges and Torys. Oaktree’s board of directors received legal advice from Mayer Brown and financial advice from Sandler O’Neill & Partners.
The deal is subject to shareholder approval and customary closing conditions and is expected to be completed in the third quarter of 2019.