Brookfield Business Partners L.P. (NYSE: BBU, BBU.UN; TSX: BBUC, BBU), a leading global business services and industrials company, has announced the sale of its nuclear technology services operation, Westinghouse Electric Company, to a consortium led by Cameco Corporation and Brookfield Renewable Partners. The transaction, valued at approximately $8 billion, highlights the successful turnaround of Westinghouse under Brookfield’s ownership and is poised to deliver substantial returns for its investors. This strategic divestment underscores Brookfield Business Partners Lp’s expertise in acquiring and enhancing essential businesses, further solidifying its position as a premier global investment firm.
Westinghouse, a critical player in the nuclear power industry, providing essential technologies, products, and services, was acquired by Brookfield Business Partners LP out of bankruptcy in 2018. Recognizing the inherent value and potential of Westinghouse, Brookfield implemented a comprehensive operational improvement plan. This involved installing a new, world-class management team, streamlining the organizational structure, refining the company’s offerings to focus on core strengths, optimizing the global supply chain, and strategically investing in cutting-edge technologies. These initiatives were instrumental in revitalizing Westinghouse and preparing it for future growth.
The results of Brookfield Business Partners LP’s strategic interventions are clearly evident in Westinghouse’s financial performance. Under Brookfield’s stewardship, Westinghouse’s profitability nearly doubled, demonstrating the effectiveness of the operational enhancements and strategic direction implemented. Today, Westinghouse is exceptionally well-positioned to capitalize on favorable industry trends. The increasing global recognition of nuclear power as a reliable and clean energy source, crucial for achieving worldwide decarbonization targets, provides a strong tailwind for Westinghouse’s continued success. This sale comes at a time when the demand for nuclear energy is resurging, making Westinghouse an even more attractive asset.
Cyrus Madon, CEO of Brookfield Business Partners, stated, “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.” He further emphasized the transformative journey of Westinghouse under Brookfield’s ownership, noting, “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 statement underscores the value creation that Brookfield Business Partners LP brings to its portfolio companies.
The financial outcomes of this divestment are particularly impressive. Brookfield Business Partners LP anticipates proceeds that equate to approximately 6 times its invested capital, generating an estimated 60% Internal Rate of Return (IRR) and a total profit of $4.5 billion when combined with prior distributions. Brookfield Business Partners LP itself expects to receive approximately $1.8 billion from the sale of its 44% stake in Westinghouse, with the remaining portion distributed to its institutional partners. This significant return on investment showcases Brookfield Business Partners LP’s ability to identify undervalued assets, implement strategic improvements, and generate substantial value for its stakeholders.
Transaction Overview
The sale of Westinghouse is structured with a total enterprise value of approximately $8 billion, which includes proceeds from the disposition of a non-core asset expected before the transaction closes. The Consortium acquiring Westinghouse is strategically composed of Cameco Corporation, a leader in nuclear fuel, and Brookfield Renewable Partners, a global renewable power platform. This combination is expected to further strengthen Westinghouse’s position in the evolving energy landscape.
The closing of the transaction is contingent upon standard conditions, including approval from Brookfield Business Partners LP unitholders, regulatory clearances, and other customary closing conditions. The transaction is currently anticipated to be finalized in the second half of 2023. Shareholder and regulatory scrutiny is a normal part of such large transactions, ensuring due diligence and fairness for all parties involved.
Independent Valuation and Fairness Assurance
To ensure fairness and protect the interests of all stakeholders, the transaction underwent rigorous independent review. The Governance and Nominating Committee of Brookfield Business Partners LP, comprised of independent directors, oversaw this process. An independent valuator and financial advisor were retained by the Independent Committee to provide a formal valuation and fairness opinion.
The independent valuation concluded that, as of October 11, 2022, the fair market value of Brookfield Business Partners LP’s interest in Westinghouse ranged between $1.265 billion and $1.8 billion. Furthermore, the independent valuator and financial advisor delivered an opinion confirming that the aggregate consideration to be received by Brookfield Business Partners LP in the transaction is financially fair to the company. These independent assessments provide assurance that the transaction is beneficial for Brookfield Business Partners LP and its unitholders.
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 LP. Consequently, the Brookfield Business Partners Board, excluding conflicted directors, unanimously approved the transaction and recommended that unitholders vote in favor at a special meeting.
The transaction is subject to “minority approval,” requiring approval from more than 50% of votes cast by unitholders, excluding units held by “interested parties” like Brookfield Asset Management and its affiliates. This measure ensures minority shareholder protection in significant transactions. Brookfield Business Partners LP expects to distribute an information circular in November 2022 and hold the special meeting in December 2022 to seek unitholder approval. Brookfield Business Partners LP has already secured support agreements from unitholders representing approximately 37% of eligible votes, indicating strong initial backing for the transaction.
Advisors to the Transaction
Brookfield Business Partners LP received financial advisory services from RBC Capital Markets and BMO Capital Markets, and legal counsel from Weil, Gotshal & Manges LLP. The Independent Committee was advised by TPH & CO., the energy business of Perella Weinberg Partners, as independent valuator and financial advisor, and Stikeman Elliott LLP as legal counsel. The involvement of these leading advisory firms underscores the complexity and significance of this transaction.
About Brookfield Business Partners LP
Brookfield Business Partners L.P. is a global business services and industrials company focused on acquiring and managing high-quality businesses that deliver essential products and services and benefit from strong market positions. It offers investors the flexibility to invest through Brookfield Business Corporation (NYSE, TSX: BBUC) or Brookfield Business Partners L.P. (NYSE: BBU; TSX: BBU.UN). Brookfield Business Partners LP is the flagship listed entity of Brookfield Asset Management’s Private Equity Group, leveraging the resources and expertise of a leading global alternative asset manager with over $750 billion in assets under management. This transaction exemplifies Brookfield Business Partners LP’s strategic approach to value investing and operational excellence, further cementing its reputation in the global investment community.
For further details, investors and media can reach out to the contacts provided in the original press release.
Forward-Looking Statements
It’s important to note that this announcement contains forward-looking statements, which involve risks and uncertainties. Actual results may differ materially from those projected due to various factors, including market conditions, regulatory approvals, and other risks detailed in Brookfield Business Partners LP’s filings with securities regulators. Investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of the announcement.
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