Brookfield Business Partners (NYSE: BBUC, BBU; TSX: BBUC, BBU.UN), a leading global business services and industrials company, has announced a landmark agreement to sell its nuclear technology services operation, Westinghouse Electric Company. The sale, executed in partnership with its institutional partners, involves a strategic consortium led by Cameco Corporation and Brookfield Renewable Partners (referred to as the “Consortium”). The total enterprise value of this significant transaction is approximately $8 billion, which includes proceeds from the divestiture of a non-core asset anticipated before the deal concludes.
This strategic move marks a highly successful chapter for Brookfield Business Partners and Westinghouse. Acquired out of bankruptcy in 2018, Westinghouse has been revitalized under Brookfield’s ownership. This sale not only underscores Brookfield’s operational expertise but also delivers substantial returns for its investors.
Westinghouse: From Turnaround to High-Value Asset Under Brookfield
When Brookfield Business Partners acquired Westinghouse, it recognized the inherent value and potential of a global leader in mission-critical technologies for the nuclear power industry. Brookfield implemented a comprehensive turnaround strategy, starting with the appointment of a new, world-class management team. This team spearheaded a series of crucial improvements:
- Organizational Restructuring: Streamlining operations and enhancing efficiency across the business.
- Product and Service Refocus: Concentrating on core strengths and high-growth areas within the nuclear sector.
- Global Supply Chain Optimization: Improving resilience and cost-effectiveness in Westinghouse’s global operations.
- Investment in Cutting-Edge Technology: Ensuring Westinghouse remains at the forefront of nuclear technology innovation.
These strategic initiatives paid off handsomely. Under Brookfield Business Partners’ stewardship, Westinghouse’s profitability nearly doubled. The company is now exceptionally well-positioned to capitalize on favorable industry trends, particularly the growing global recognition of nuclear power as a crucial, reliable, and clean energy source for achieving decarbonization goals.
Strategic Sale to Consortium: Synergies and Value Realization
The decision to sell Westinghouse to a consortium led by Cameco and Brookfield Renewable Partners is a strategic alignment that benefits all parties. For Cameco, a leading global provider of uranium fuel, and Brookfield Renewable Partners, one of the world’s largest publicly traded renewable power platforms, Westinghouse represents a complementary asset that strengthens their positions in the broader clean energy landscape.
Cyrus Madon, CEO of Brookfield Business Partners, highlighted the achievement: “We are pleased to have reached an agreement to sell Westinghouse that crystalizes meaningful value for our investors and provides significant proceeds to support our continued growth. We have significantly enhanced the business’ operations over the past four years, increasing its margins and strengthening its global leadership position. Westinghouse is an exceptionally well-run business today and has a great future.”
This sale allows Brookfield Business Partners to realize substantial value from its investment in Westinghouse, while ensuring the company transitions into the hands of strategic owners who can further its growth trajectory within the evolving energy sector.
Exceptional Financial Returns for Brookfield Business Partners
The Westinghouse sale is a financial triumph for Brookfield Business Partners, demonstrating its ability to acquire, enhance, and strategically divest businesses for exceptional returns. Combined with distributions received to date, Brookfield anticipates proceeds equating to approximately 6 times its invested capital. This translates to an impressive 60% Internal Rate of Return (IRR) and a total profit of $4.5 billion.
From the sale, Brookfield Business Partners itself expects to generate approximately $1.8 billion in proceeds from its 44% stake in Westinghouse. The remaining balance will be distributed to its institutional partners. These significant proceeds will further bolster Brookfield Business Partners‘ capacity for future investments and growth initiatives.
Transaction Details, Approvals, and Timeline
The Westinghouse transaction is subject to standard closing conditions, including approval from Brookfield Business Partners unitholders and customary regulatory approvals. The deal is currently anticipated to close in the second half of 2023.
To ensure fairness and transparency, the transaction underwent rigorous independent review. The Governance and Nominating Committee of Brookfield Business Partners‘ general partner, comprised of independent directors (the “Independent Committee”), oversaw this process.
Independent Valuation and Fairness Opinion
The Independent Committee engaged an independent valuator and financial advisor to provide both a formal valuation and a fairness opinion. As of October 11, 2022, this independent assessment placed the fair market value of Brookfield Business Partners’ interest in Westinghouse within the range of $1.265 billion to $1.8 billion. The advisor also delivered an opinion confirming that the aggregate consideration to be received by Brookfield Business Partners in the transaction is financially fair to the company.
This independent scrutiny reinforces the integrity of the transaction and assures unitholders that the sale price is within a fair market range. The proceeds agreed upon with the Consortium for Brookfield Business Partners‘ interest in Westinghouse fall within this independently assessed valuation range.
Following thorough consultation with independent financial and legal advisors, the Independent Committee unanimously concluded that the transaction is in the best interests of Brookfield Business Partners. The Brookfield Business Partners Board, excluding conflicted directors, also unanimously approved the transaction and recommended unitholder approval at a special meeting.
Unitholder Vote and Minority Approval
The transaction necessitates “minority approval,” requiring approval from more than 50% of votes cast by Brookfield Business Partners unitholders, excluding units held by “interested parties” as per regulatory requirements (Multilateral Instrument 61-101). Units held by Brookfield Asset Management and its affiliates, representing approximately 33% of Brookfield Business Partners‘ units, will be excluded from this minority approval vote.
Unitholder information, including copies of the independent valuation and fairness opinion, and factors considered by the Independent Committee, will be detailed in an information circular mailed to unitholders in November 2022, with the special meeting expected in December 2022. Brookfield Business Partners and the Consortium have already secured support agreements from unitholders representing approximately 37% of eligible votes, indicating strong initial support for the transaction.
Advisors to the Transaction
RBC Capital Markets and BMO Capital Markets served as financial advisors to Brookfield, while Weil, Gotshal & Manges LLP acted as legal counsel. TPH & CO., the energy business of Perella Weinberg Partners, was the independent valuator and financial advisor to the Independent Committee, with Stikeman Elliott LLP providing legal counsel to the Independent Committee.
About Brookfield Business Partners
Brookfield Business Partners is a global business services and industrials company focused on owning and operating high-quality businesses that deliver essential products and services and benefit from robust competitive positions. Investors can choose to invest through Brookfield Business Corporation (NYSE, TSX: BBUC) or Brookfield Business Partners L.P. (NYSE: BBU; TSX: BBU.UN). For further details, please visit https://bbu.brookfield.com.
Brookfield Business Partners is the flagship listed entity of Brookfield Asset Management’s Private Equity Group. Brookfield Asset Management, a leading global alternative asset manager with over $750 billion in assets under management, provides further information at www.brookfield.com.
This successful sale of Westinghouse exemplifies Brookfield Business Partners‘ strategic approach to value creation and its commitment to delivering strong returns for its investors.
