Brookfield's Oaktree Deal Marks Ascent as Private Equity Giant

(Bloomberg) -- Bruce Flatt put Wall Street’s biggest private equity players on notice that the Canadian juggernaut was coming for them three years ago.

The head of Brookfield Asset Management Inc. told Bloomberg Television then that his firm -- pushing into private equity -- should be mentioned in the same breath as Blackstone Group LP, Carlyle Group LP and KKR & Co. It was an unusually brash statement from the understated Winnipeg native.

He’s more than backed it up.

Brookfield's Oaktree Deal Marks Ascent as Private Equity Giant

On Wednesday, Brookfield Asset Management agreed to buy a majority stake in Oaktree Capital, a move that will create a $475 billion alternative-investing behemoth. That’s more assets under management than any of the other blue-chip buyout firms reported at year-end.

The transaction caps a flurry of deal-making across Flatt’s investing empire of four publicly traded companies focused on real estate, infrastructure, renewable energy and private equity.

“I don’t think Brookfield has grown quickly,” said Mark Rothschild, an analyst in Toronto with Canaccord Genuity Group Inc. “They’ve been growing quite a bit. But this has been going on for decades.”

Brookfield Business Partners LP, the firm’s private equity arm, agreed to buy Johnson Controls International Plc’s car battery business for $13.2 billion in November, beating suitors including Apollo Global Management LLC. In January, it struck a deal worth $3.2 billion for Healthscope Ltd., winning a 10-month takeover battle for the hospital operator.

Forest City

Brookfield also struck two jumbo real estate deals last year.

Brookfield Asset Management paid about $6.8 billion for Forest City Real Estate Trust Inc. Real estate affiliate Brookfield Property Partners LP bought the rest of GGP Inc. that it didn’t already own for about $15 billion.

The firm has been stockpiling dry powder. It just raised $15 billion for its largest real estate fund to date and is seeking $9 billion for its fifth private equity pool, or more than double what it raised for its predecessor fund.

Brookfield’s seeming knack for flying under the radar may spring from the understated way of doing business that comes from the top.

Flatt became chief executive officer of Brookfield in 2002, when it was still called Brascan Corp., which had been established to manage the fortune of Canada’s wealthy Bronfman family.

Counter-Cyclical Bets

An accountant by training, Flatt’s demeanor is low-key. He takes lunches with new hires in Brookfield’s Toronto boardroom. He has built the firm by making counter-cyclical investments in sectors and geographies where capital is scarce and assets are cheap.

Last year’s GGP deal is a bet against the so-called retail apocalypse. Brookfield has also been bullishly seeking infrastructure deals in Brazil, following a political scandal that has upended the economy. That included partnering with investors in 2016 to buy a Brazilian natural gas business from Petroleo Brasileiro SA

Brookfield is a shrewd investor that will walk away from a deal before overpaying, according to Rothschild, the Canaccord analyst.

“They are looked at as a very sophisticated, strong company that is going to buy assets when companies need to sell,” he said. “In many cases, their transactions are a little more complicated.”

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