Brookfield Asset Management Inc. is investing about $350-million in propane supplier Superior Plus Corp., as it continues to use its mountain of “dry powder” to invest in public companies trading at attractive valuations.
Over the past three months, Brookfield has taken advantage of market turmoil and depressed prices to go bargain hunting – investing in listed companies and publicly traded debt instead of its usual focus on private assets.
The Toronto-based asset manager is sitting on about $60-billion worth of investable capital across its multiple funds and business divisions. On an earnings call in mid-May, chief executive officer Bruce Flatt told analysts the company had invested about $2-billion into publicly traded companies since the markets turned in late February.
In the latest deal, Brookfield will buy US$260-million worth of preferred shares in Superior Plus US Holdings Inc., a U.S. subsidiary of Toronto-based Superior. The preferred shares carry a 7.25-per-cent cash dividend, and can be converted into common equity at Brookfield’s choosing, which would give it a 15-per-cent stake in the company. Brookfield managing partner Angelo Rufino will join Superior’s board of directors.
The deal gives Brookfield a toehold in the company that can be built upon later, depending on market conditions. This is in line with the investment strategy Mr. Flatt outlined in May.
“A large portion of this deployment was into high-quality businesses that are trading at a significant discount to our view of intrinsic value,” he said on an analyst call in May, speaking about investments Brookfield had undertaken since late February.
“Over time, these positions could lead to privatizations or controlling positions. But today, at the very least, we expect they will provide excellent returns with large margins of safety as markets normalize,” he said.
Superior intends to use the investment money to pursue acquisitions in the United States, where depressed prices and market consolidation have created what its CEO, Luc Desjardins, called “a highly opportunistic environment."
“Acquisitions are becoming increasingly attractive as fewer competing buyers are pursuing growth at the current time," Mr. Desjardins said in a news release.
Superior’s stock price jumped 12 per cent on Monday, while Brookfield’s stock was up 3.4 per cent.
The recent focus on public investments cuts across Brookfield’s businesses. Brookfield Business Partners LP, for instance, put $500-million into the stock market in April and early May, the company said in a letter to shareholders. Meanwhile, Brookfield Infrastructure Partners invested around $220-million “into the shares of a handful of companies."
“[We] hope that some of these will lead to large-scale transactions. If not, we will monetize our stakes as share prices recover and earn an attractive return in sectors we know well,” Brookfield Infrastructure Partners CEO Sam Pollock told analysts on a call in early May.
Other noteworthy deals include a $750-million investment in TransAlta Corp. by Brookfield Renewable Partners in March, and a more recent deal where one of Brookfield’s real estate funds acquired a 7.3-per-cent stake in U.K. real estate giant British Land Co. PLC.
On the debt side of things, Brookfield’s new 62-per-cent-owned subsidiary, Oaktree Capital Group LLC, has been working flat out over the past few months, accelerating its focus on public markets.
The Los Angeles-based distressed debt investor, which Brookfield bought into last year, invested $8.5-billion during and shortly after the most recent quarter, Mr. Flatt said in May. Oaktree’s main distressed debt fund has deployed 80 per cent of its capital, and is preparing to raise more.
“This is one of the great environments ... to buy distressed debt that may have ever been in existence,” Mr. Flatt said.
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Mark Rendell