Brookfield Deal Extends Boom In Loan-Backed M&A

Brookfield is on an M&A spree.

Last month, in one of the biggest leveraged buyouts since the 2008 financial crisis, a group led by the private equity arm of Brookfield Asset Management agreed to buy the automotive battery-making business of Johnson Controls International for $13.2 billion.

The cash deal extends a booming 10-month stretch in which institutional loans backing mergers and acquisitions reached $292 billion, according to Debtwire, for an increase of 28% over the same period a year earlier. It’s the latest in a series of leveraged buyouts by Toronto-based Brookfield. In August, the Canadian investment group completed a $15 billion deal to take U.S. mall operator GGP private, as well as a $4.6 billion deal to buy Westinghouse Electric, the nuclear services company, together with institutional partners.

Brookfield is buying the car and light truck battery-making business of Cork, Ireland-based Johnson Controls alongside the Caisse de Depot et Placement, Quebec’s public pension fund. Each will provide approximately 30% of the $3 billion equity in the deal, with other institutional investors financing the remainder. The private equity group plans to raise more than $10 billion of debt for the takeover.

Johnson Controls’ automotive battery business, the world’s largest, generates about $8 billion in revenue yearly and supplies about a third of the global market for lead-acid car batteries. Brookfield Asset Management is carrying out the deal through Brookfield Business Partners, its publicly listed private-equity vehicle, which specializes in businesses related to real estate and infrastructure.

Johnson Controls said it would use as much as $3.5 billion of the proceeds from the sale to pay down its multibillion-dollar debt burden. Two years ago, the company purchased Tyco International, an Ireland-based company that provides fire protection for buildings. That deal was done in part to shift Milwaukee-based Johnson Controls’s tax domicile to Ireland. The company serves a wide range of customers building “intelligent” buildings and creating “smart cities” in more than 150 countries.