Brookfield Asset Management Inc. (NYSE: BAM), a global alternative asset manager with more than $350 billion in assets under management, has agreed to purchase 62 percent of Oaktree Capital Group LLC (NYSE: OAK), an alternative investment firm with $120 billion in AUM. The transaction is expected to close in the third quarter of 2019.
The two companies together will have approximately $475 billion of assets under management and $2.5 billion of annual fee-related revenues, creating one of the largest alternative asset management firms. By comparison, private equity giant Blackstone (NYSE: BX) had $472 billion in AUM at the end of 2018.
Both Brookfield and Oaktree will continue to operate their respective businesses independently with each remaining under its current brand and led by its existing management and investment teams.
Howard Marks will continue as co-chairman of Oaktree, Bruce Karsh as co‑chairman and chief investment officer, and Jay Wintrob as chief executive officer. Marks and Karsh will continue to have operating control of Oaktree as an independent entity for the foreseeable future. In addition, Marks will join Brookfield’s board of directors.
“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,” said Brookfield CEO Bruce Flatt.
Brookfield will purchase Oaktree shares for either $49.00 in cash or 1.077 Brookfield Class A shares. Elections will be made on a per unit basis and will be subject to pro-ration so that the total consideration paid by Brookfield consists of 50 percent in cash and 50 percent in Brookfield shares.
In addition, the founders, senior management, and current employee-unitholders of Oaktree Capital Group Holdings, L.P., the holder of all outstanding Class B units of Oaktree as well as a direct interest in certain of Oaktree’s operating entities, will sell to Brookfield 20 percent of their units for the same consideration as the Oaktree Class A unitholders.
Oaktree may declare and pay a distribution in respect of the quarter ending March 31, 2019 in an amount up to $1.05 per Oaktree Class A unit. No further distributions may be paid unless the transaction has not closed by September 30, 2019.
The cash portion of the consideration will be funded by Brookfield from available liquidity and will result in a 62 percent ownership of Oaktree’s business. Oaktree Capital Group Holdings unitholders, consisting primarily of Oaktree’s founders and other members of management and employees, will own the remaining 38 percent.
Beginning in 2022, former employee-unitholders will be able to sell their remaining Oaktree units to Brookfield over time at an agreed upon liquidity schedule. Oaktree’s founders, senior management and current employee-unitholders will have the option to do so as well. Under the terms of the deal, Brookfield could take over full ownership of Oaktree by 2029.
Brookfield Asset Management has more than a 120-year history of owning and operating assets with a focus on real estate, renewable power, infrastructure and private equity. Brookfield offers both public and private investment products and services, and is co-listed on the New York, Toronto and Euronext stock exchanges.
Oaktree Capital Group LLC emphasizes an opportunistic, value- oriented and risk-controlled approach to investments in credit, private equity, real assets and listed equities. The firm has more than 950 employees and offices in 18 cities worldwide.