Brookfield Asset Set To Privatize Its Property Wing In US$6.5-Bn Deal

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Brookfield Asset Set To Privatize Its Property Wing In US$6.5-Bn Deal

 Brookfield Asset Set To Privatize Its Property Wing In US$6.5-Bn Deal

Source: Jirapong Manustrong, Shutterstock

Summary

  • Brookfield Property's board has taken a unanimous call and approved the deal.
  • Brookfield Asset already owned 60 per cent of Brookfield Property.
  • The company’s CFO had indicated that making Brookfield Property private seemed logical.

Brookfield Asset Management Inc. (TSX: BAM.A) on Thursday, April 1, announced that it will acquire the shares of already owned Brookfield Property Partners LP (TSX: BPY.UN). The deal would be worth US$ 6.5 billion and will make Brookfield Asset's real estate wing private. The company will acquire the outstanding units at US$ 18.17 apiece, an increase of 10 per cent of what it had proposed in January.

According to the press release, Brookfield Property's board has taken a unanimous call and approved the deal. The stocks were priced at US$ 17.79 apiece at market close on March 31.

In a statement, Nick Goodman, Chief Financial Officer of Brookfield Asset said that this deal will allow the company to manage their portfolio of high-quality assets in the real estate sector and also further explore it. Notably, Brookfield Asset already owned 60 per cent of Brookfield Property. The deal will likely be completed in the third quarter of 2021 and will be subjected to a vote of shareholders. 

The motivating reason behind this move could be the growth potential of real estate assets. In January, Mr Goodman had indicated that making Brookfield Property private seemed logical as it was continuously trading at a discount in comparison to the underlying value of the company's assets.  Brookfield Property was hit by the pandemic and it reported a loss of US$ 2 billion in 2020, forcing the company to come up with a take-private proposal.

Source: Pixabay

In the recent past, companies have started focusing on the real estate sector. Recently, George Weston Limited (TSX: WN) announced to sell its 139-year-old retail business to focus on its retail and real estate sector.

 

A look at Brookfield Asset’s stock and financials:

 

The Toronto-based company has a market cap of over C$ 88 billion and holds a price-to-book ratio of 2.12. It offers a dividend of US$ 0.13 every quarter and yields 1.181 per cent.

In the last three years, the company witnessed a dividend growth rate of 8.53 per cent and 8.30 per cent in five years.

The stock grew 34.4 per cent in a year and 10.82 per cent year-to-date. In the last quarter financial results, the company’s net income was US$ 1,815 million, an increase of 10.8 per cent year-over-year (YoY).

In full-year results, the cash and cash equivalents were US$ 9,933 million, up by 46.54 per cent YoY.

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