Brookfield Asset Management is mulling separating part of its asset management business into a separate company.
In a letter to shareholders issued on Thursday , Bruce Flatt, Brookfield Asset Management CEO, wrote that the company's asset management business is "now one of the largest and fastest-growing scale alternative investment businesses globally" and together with "the added benefit of having the longest duration of annuity-like cash flows of any asset manager," suggests the unit could now "simply be separated from our capital."
"Its growth path on its own is very compelling, as many of our strategies are getting larger with each vintage and are compounding on each other," Mr. Flatt wrote in the letter.
Mr. Flatt estimated in the letter that a separate asset management business would have an equity value of between $70 billion to $100 billion – or about $45 to $60 per share. Mr. Flatt noted that figure excludes the equity capital that Brookfield has invested in "our businesses, which today is around another $50 billion net (circa $30 per share)."
A separation of part of the asset management business, Mr Flatt added, could "open up growth options to us that do not exist today, as we dislike ever issuing shares at less than what we believe to be at least their full fair value."
Mr. Flatt also noted in the letter that as Brookfield's reinsurance and investment operations grow, separating a part of the asset management business "might make sense in order to allow investors who only want exposure to the (asset manager) to own a separate security."
Mr Flatt indicated in the letter that performance of the asset management business is "very strong." On a go-forward basis, he added, "annualized asset management revenues, including carry, are now running at $7.8 billion, and we are launching new funds across all our strategies."
According to an initial draft of an earnings call with analysts on Thursday, Mr. Flatt said "if we separate part of the (asset) manager this could increase (the) simplicity and ease of valuing our asset management business."
In reply to an analyst's question, Mr. Flatt said that a spun-off entity "will be a full security" and a "separately listed company."
"The (Brookfield) parent may own a part of it and we're going to separate and distribute to our shareholders a part of the (asset management) business," Mr. Flatt added.
In another release also issued on Thursday, Brookfield said it had about $690 billion in assets under management as of Dec. 31 across real estate, infrastructure, renewable power and transition, private equity and credit. Assets were up 6.2% from three months earlier and 15% higher than the end of the year-ago quarter.