Brookfield Plans to Buy Majority of Oaktree Capital -- WSJ
March 14 2019 - 3:02AM
Dow Jones News
By Miriam Gottfried
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (March 14, 2019).
Brookfield Asset Management Inc. is buying a majority stake in
Oaktree Capital Management, bringing an end to the
credit-investment firm's six-year run as a public company.
Brookfield will buy about 62% of the Oaktree business, acquiring
all outstanding shares of its publicly traded common stock for $49
in cash, or 1.077 Brookfield shares. The deal represents a 12%
premium to Oaktree's closing price on Tuesday, the companies
said.
Oaktree's preferred shareholders, which primarily consist of its
co-chairmen, Howard Marks and Bruce Karsh, their fellow co-founders
and other management and employees, will also sell 20% of their
nonpublicly traded preferred shares to Brookfield for the same
price. After the deal is complete, Oaktree's preferred shareholders
will own about 38% of the firm.
The two businesses will continue to operate independently, with
each remaining under its current brand and leadership. Two
representatives from Brookfield will join Oaktree's board, and Mr.
Marks will join Brookfield's board.
The deal will bolster the credit business of Brookfield, which
has more than $350 billion in assets spread over real estate,
infrastructure and private equity.
Oaktree is known for its distressed-investing expertise, but its
time as a public company has clashed with the longest bull market
in history. Its stock, including dividends, has climbed 61% from
its 2012 initial public offering through Tuesday's close, compared
with a 133% rise for the S&P 500.
"Because we're so countercyclical, we weren't adding assets,"
Mr. Marks said in an interview. "With public ownership, if you
can't produce a steady stream of assets and growth, it's not an
interesting story."
Oaktree's assets were $120 billion in December 2018, up only 5%
since 2015 as markets soared. By comparison, assets for Blackstone
Group LP, the largest publicly traded private-equity firm by
assets, have climbed by around 40% over that period.
"If you aspire to be a multiclass asset manager, you need to
have private credit, as well as private equity, real estate and
infrastructure," said Jeff Hammer, co-head of illiquid financial
assets at investment bank Houlihan Lokey.
Oaktree founders and senior management will be able to sell
their remaining units in equal parts between 2022 and 2026, with
other preferred shareholders having until 2029 to sell. The
earliest Brookfield could own 100% of Oaktree is 2029.
Before co-founding Oaktree in 1995, Mr. Marks, 72 years old, led
the distressed-debt, high-yield bond and convertible-securities
groups at TCW Group Inc. Known for his regular missives on the
market, he has been warning since 2011 about excessive risk taking
by investors, high asset prices and the potential for another
credit bubble to pop.
"I've written so many cautionary memos, you might conclude that
I'm just a born worrier who eventually is made to be right by the
operation of the cycle," he said in a 2017 letter.
--Matt Wirz, Soma Biswas and Colin Kellaher contributed to this
article.
Write to Miriam Gottfried at Miriam.Gottfried@wsj.com
(END) Dow Jones Newswires
March 14, 2019 02:47 ET (06:47 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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