Brookfield Asset Management has offered to buy all of the shares it doesn’t already own in Brookfield Property Partners (BPY), in a $5.9 billion deal to take the commercial real estate company private. BPY shares closed almost 18% higher on Monday, while BAM dropped 4.4%.
According to the proposal, Brookfield (BAM) and a group of institutional investors will pay $16.50 per BPY unit, a premium of about 14% to the stock’s US closing price on Dec 31. The offer also includes an alternative option for BPY shareholders to choose 0.4 of Brookfield Asset Management’s stock, or 0.66 of Brookfield Property’s preferred units.
Canada’s Brookfield Asset Management, which has about $575 billion of assets under management, already owns about a 60% stake in BPY. The commercial real estate business has about $88 billion in total assets, including London’s Canary Wharf and Brookfield Place in New York. BPY stock has spiked 45% over the past six months.
Nick Goodman, CFO of Brookfield Asset Management stated, “The offer presents an excellent opportunity for BPY unitholders to either monetize their units in cash at a premium to recent trading prices, continue to invest with us in the upside of the portfolio via Brookfield shares, or select BPY preferred units designed for income-oriented investors who would like to maintain similar dividend income which they receive from BPY today in a preferred instrument, based on what is best for them.”
Goodman added, “The privatization will allow us to have greater flexibility in operating the portfolio and realizing the intrinsic value of BPY’s high-quality assets.”
Additionally, Brookfield said that the alternative asset manager will ensure that holders of the Class A stock of Brookfield Property REIT Inc. will be entitled to receive the same per share consideration as BPY unitholders under the proposal upon exchange of their shares into BPY units.
Canaccord analyst Mark Rothschild recently named BAM as one of his top picks and investment ideas for 2021.
“Brookfield Asset Management should benefit from rising allocations to alternative investments and growing management fees,” Rothschild wrote in a note to investors, while reiterating a Buy rating on the stock with a $48 (22% upside potential).
“Combined with continued growth at most of its large subsidiaries and various new business strategies, we believe Brookfield is well positioned to grow cash flow considerably over the next few years,” the analyst summed up. (See BAM stock analysis on TipRanks)
The rest of the Street is firmly in line with Rothschild’s bullish outlook, which joins 4 recent Buy ratings and add up to a Strong Buy analyst consensus. The average price target stands at $48.20 and implies 22% upside potential over the coming year.
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