Brookfield Asset Management plans to spin off 25% of its stake in its asset management business to shareholders by the end of the year.
The transaction will result in two companies: an alternative asset management firm and a capital investor of its proprietary assets, Brookfield said in a news release.
In an earnings call on Thursday, CEO Bruce Flatt said “based on our estimate of values, shareholders will receive a special distribution of $20 billion of shares, which is somewhere around $12 per share.” The distribution of shares will be tax-free for both Canadian and U.S. stockholders.
Each unit will have its “own financial dynamics” and each “will be easier to analyze when viewed from the outside,” the news release said.
The part of the company that will not be spun off (the capital investor) will initially hold a 75% ownership stake in the asset management firm, which had $725 billion in assets under management as of March 31.
In addition, the capital investor unit will “continue to make early investment commitments” to funds managed by the asset management unit and also make “direct investments in new and existing businesses, or repurchase shares when they represent the best potential use of funds,” the release added.
Brookfield also indicated in the release that the spun-off entity will eventually pay out about 90% of its annual earnings in dividends.
“Over the last 20 years, we have successfully grown two businesses, our capital investments and our alternative asset management franchise side by side, the combination of the two has been a significant competitive advantage to us and while they are different in nature they have worked very well together,” said Nick Goodman, chief financial officer, during the earnings call.
The two entities will both trade on the New York and Toronto stock exchanges, the release added.
The transaction remains subject to approval of current shareholders.
Brookfield invests across real estate, infrastructure, renewable power and transition, private equity and credit. Its $725 billion in AUM was up 5.1% from the end of 2021 and up 20.8% from March 31, 2021.