Brookfield Business Partners (NYSE: BBUC, BBU; TSX: BBUC, BBU.UN), a prominent player in the Brookfield Business Partners Private Equity landscape, has announced a landmark agreement to divest its nuclear technology services operation, Westinghouse Electric Company. This strategic move, finalized with a consortium led by Cameco Corporation and Brookfield Renewable Partners, underscores Brookfield’s adeptness at value creation and portfolio optimization within the private equity sector. The total enterprise value of this transaction is estimated at approximately $8 billion, signaling a significant return on investment for Brookfield and its partners.
Brookfield acquired Westinghouse in 2018, navigating the business out of bankruptcy. This acquisition is a testament to the firm’s expertise in identifying and revitalizing complex businesses. Under Brookfield business partners private equity’s ownership, Westinghouse underwent a substantial transformation. A new, experienced management team was installed, and strategic initiatives were implemented to enhance the company’s operations. These initiatives included streamlining the organizational structure, sharpening the focus on core product and service offerings, optimizing the global supply chain, and strategically investing in cutting-edge technology.
The results of brookfield business partners private equity’s operational enhancements are clearly evident in Westinghouse’s financial performance. Profitability nearly doubled during Brookfield’s ownership, showcasing the effectiveness of their value-driven approach. Today, Westinghouse is exceptionally well-positioned to capitalize on favorable industry trends, notably the growing global recognition of nuclear power as a crucial, dependable source of clean energy essential for achieving worldwide decarbonization objectives.
Cyrus Madon, CEO of Brookfield Business Partners, emphasized the strategic significance of this sale: “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 added, “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 highlights the core tenets of brookfield business partners private equity strategy – enhance, optimize, and realize value.
The financial outcomes for Brookfield from the Westinghouse investment are compelling. Combined with prior distributions, the expected proceeds are projected to be approximately 6 times the invested capital. This translates to an impressive 60% Internal Rate of Return (IRR) and a total profit of $4.5 billion. Brookfield Business Partners anticipates receiving approximately $1.8 billion in proceeds from the sale of its 44% stake in Westinghouse, with the remaining balance distributed to its institutional partners. This lucrative exit underscores the potential of brookfield business partners private equity to generate substantial returns for its investors through strategic acquisitions and operational improvements.
Transaction Overview
The Westinghouse transaction is anticipated to close in the latter half of 2023, pending customary closing conditions. These conditions include the approval of Brookfield Business Partners unitholders, receipt of necessary regulatory approvals, and other standard closing procedures.
Independent Valuation and Fairness Assessment
To ensure fairness and protect the interests of all stakeholders, the transaction underwent rigorous independent review. The Governance and Nominating Committee, composed of independent directors of Brookfield Business Partners’ general partner, oversaw this process.
The Independent Committee engaged an independent valuator and financial advisor to conduct a formal valuation. This valuation, dated October 11, 2022, estimated the fair market value of Brookfield Business Partners’ interest in Westinghouse to be within the range of $1.265 billion to $1.8 billion. Furthermore, the independent advisor delivered a fairness opinion, confirming that the aggregate consideration to be received by Brookfield Business Partners in connection with the transaction is financially fair to the company. It’s noteworthy that this valuation and fairness opinion excluded proceeds from the separate sale of a non-core asset and estimated cash generated within Westinghouse before the transaction closes. The final proceeds agreed upon with the Consortium fall within the range of this independent valuation, reinforcing the fairness of the deal.
Following thorough consultation with independent financial and legal counsel, the Independent Committee unanimously concluded that the transaction is in the best interests of Brookfield Business Partners. Consequently, the Committee recommended that the Brookfield Business Partners Board approve the transaction. The Board, excluding conflicted directors, unanimously approved the transaction and recommended unitholder approval at a special meeting.
The transaction is also contingent upon “minority approval,” requiring approval from more than 50% of votes cast by unitholders, excluding those held by “interested parties” as per Multilateral Instrument 61-101. This means units held by Brookfield Asset Management and its affiliates, representing approximately 33% of Brookfield Business Partners’ units, will be excluded from this minority approval process. Detailed information, including copies of the independent valuation and fairness opinion, will be provided 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 secured support agreements from unitholders representing approximately 37% of eligible votes, further indicating strong support for the transaction.
Advisors
RBC Capital Markets and BMO Capital Markets served as financial advisors to Brookfield, while Weil, Gotshal & Manges LLP acted as legal advisor. TPH & CO., the energy business of Perella Weinberg Partners, served as independent valuator and financial advisor to the Independent Committee, and Stikeman Elliott LLP provided legal counsel.
Brookfield Business Partners: A Leader in Private Equity
Brookfield Business Partners is recognized as a leading global business services and industrials company specializing in owning and operating high-quality businesses. The firm strategically focuses on essential products and services within sectors that benefit from strong competitive positions. Investors can engage with Brookfield Business Partners through Brookfield Business Corporation (NYSE, TSX: BBUC) or Brookfield Business Partners L.P. (NYSE: BBU; TSX: BBU.UN). Brookfield Business Partners operates as the flagship listed vehicle of Brookfield Asset Management’s Private Equity Group. Brookfield Asset Management, a prominent global alternative asset manager, boasts over $750 billion in assets under management. This Westinghouse sale further solidifies brookfield business partners private equity’s reputation for strategic investment and value creation in the global market.
Contact Information:
| Investor Relations Alan Fleming Tel: +1 (416) 645 2736 Email: [email protected] | Media Sebastien Bouchard Tel: +1 (416) 943-7937 Email: [email protected] |
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Forward-Looking Statements
This news release contains forward-looking statements and information, which are subject to risks and uncertainties. These statements relate to future events and conditions, including the expected closing of the Westinghouse transaction and its anticipated benefits. Actual results may differ materially due to various factors, including economic conditions, market risks, regulatory approvals, and other factors outlined in Brookfield Business Partners’ filings with securities regulators. Readers are cautioned not to place undue reliance on forward-looking statements, and Brookfield Business Partners undertakes no obligation to update or revise these statements except as required by law.
