Brookfield Asset Management to Buy 62% of Oaktree Capital -- 3rd Update

By Miriam Gottfried

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 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 traditionally focused on 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.

The sale to Brookfield offers a path to liquidity for top management that wasn't available previously.

"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.

Being under the same roof as Brookfield should help Oaktree smooth out the lumpiness in its business, said Brookfield Chief Executive Bruce Flatt in an interview.

"Tucked under a broad alternative manager, you can run a very client-centric business that ramps up during periods of time and then de-escalates when you should be selling things," Mr. Flatt said.

----Colin Kellaher contributed to this article.

Write to Miriam Gottfried at Miriam.Gottfried@wsj.com

(END) Dow Jones Newswires

March 13, 2019 14:45 ET (18:45 GMT)

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