Billionaire Trio Unites With Brookfield's Purchase of Oaktree
(Bloomberg) -- Brookfield Asset Management is poised to create a $475 billion investing behemoth with its deal to buy a majority of Oaktree Capital, and some of Wall Street’s richest executives are joining forces as a result.
Oaktree co-founder Howard Marks will sit on Brookfield’s board alongside Chief Executive Officer Bruce Flatt. Both billionaires say they expect a seamless transition.
There will be “no change to either of the businesses,” Flatt, 53, said in an interview Wednesday. “The overlap you see is quite small and even where there is overlap the business that we run and Oaktree runs is quite different.”
The combined group will include at least one other billionaire, Oaktree co-Chairman Bruce Karsh.
The deal, expected to be completed in the third quarter, will end more than two decades of independence for Marks and Karsh, whose firm managed $120 billion of assets at the end of 2018 but still found itself dwarfed by some competitors like Blackstone Group LP.
Still, analysts say the combination leaves the Oaktree duo with plenty of autonomy. Marks, 72, and Karsh, 63, will continue to operate Oaktree as an independent entity, the companies said.
Brookfield made its initial approach in October, Marks said.
“It’s taken a long time to build what Oaktree has,” he said. “They approached us with a transaction that we found highly appealing from the beginning, based on providing a lot of runway for us in which we can independently run the business and the option of eventual liquidity.”
Brookfield will acquire about 62 percent of Oaktree in a cash and stock deal. The firms together will have a combined assets under management of about $475 billion, rivaling Blackstone, and $2.5 billion of annual fee-related revenue, according to the statement.
In 2002, Marks laid out his requirements for suitable would-be investors in his firm, including “no cessation of Oaktree’s existence as an autonomous entity,” noting how improbable it was that they would be met, according to a memo to clients Wednesday.
The deal values the Oaktree holdings of Marks and Karsh at about $800 million each, according to calculations by the Bloomberg Billionaires Index. The pair have received hundreds of millions more through stock sales and investments in Oaktree’s funds, regulatory filings show.
Marks ran Citibank’s convertible- and high-yield bond funds in Los Angeles in the 1980s before moving to TCW in 1985, where he became known for sending out memos to customers about his investing philosophy, interspersed with anecdotes about his family. He started Oaktree with Karsh and four other partners in 1995, and it went public in 2012.
While Marks is one of Wall Street’s most familiar faces, Flatt keeps a lower profile. A former accountant, he joined the Canadian firm in the 1990s and, after leading its property arm, became the group’s head in 2002. He has a $1.8 billion stake in Brookfield, filings show.
Billionaire bond trader Jeffrey Gundlach is also an indirect part of this universe. Oaktree owns 20 percent of his DoubleLine Capital LP after spending about $20 million for its stake in 2009.
Such constellations of billionaires are likely to become more common as the world of finance consolidates. Marks expects plenty more deals.
“The industry is continuing to drive toward concentration of greater amounts of money in fewer groups,” he said. “Strategic partnerships are going to be a theme for the future.”
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