Brookfield acquires Westinghouse for $4.6B

Despite firm’s woes, Westinghouse bought for $4.6B

Brookfield Asset Management’s CALGARY private equity unit struck its biggest-yet deal Thursday, buying up bankrupt nuclear technology powerhouse Westinghouse Electric Co. LLC for US$4.6 billion, in a bold move that appears to be welcomed by investors.

Pittsburgh-based Westinghouse, owned by Japan’s Toshiba Corp., sought bankruptcy protection last March amid cost overruns at four new nuclear reactors under construction in Georgia and South Carolina — a development that hurt the utility companies involved in its construction and forced the parent company to record billions of dollars in writedowns. Toshiba bought Westinghouse for US$5.4 billion in 2006.

Amid the cost overruns, returns for nuclear power generation in the U.S. have also been under extreme pressure from abundant low-cost natural gas production, which left utility companies powered by nuclear energy at a huge disadvantage against the cheaper, gas-fired power generation companies.

Despite these challenges, Brookfield Business Partners is betting big on the nuclear business.

“Even though they don’t have a history in nuclear it really does feel like a fit,” said Ann Dai, New Yorkbased analyst with Keefe, Bruyette and Woods.

Another Brookfield affiliate, Brookfield Renewable Partners LP, recently closed a similar transaction in its purchase of bankrupt SunEdison’s TerraForm Power solar business for US$1.4 billion, Dai said.

Dai said Brookfield frequently swoops in to buy up assets or companies “at a point where there are not a lot of obvious buyers” with plans to transform the assets over a longer time frame.

Brookfield Business Partners’ shares rose more than four per cent Thursday following the deal announcement to close at $45.10 in Toronto. Parent company Brookfield Asset Management, which was up a more subdued 0.7 per cent, operates the industrial division of its private equity group via BBP.

Blackstone Group LP and Apollo Global Management LLC had put together a competing bid for Westinghouse Electric and as did Cerebus Capital Management LP, according to Bloomberg.

Ultimately, the bid led by Brookfield succeeded, and the company intends to fund the purchase through $1 billion in equity and $3 billion of long-term debt.

“Westinghouse is a high-quality business that has established itself as a leader in its field, with a longterm customer base and a reputation for innovation,” Brookfield Business Partners CEO Cyrus Madon said in a release.

Madon added that Brookfield would use its “reputation as a longterm owner” to help build Westinghouse’s “position as a global infrastructure services provider to the power generation industry.”

Westinghouse Electric designs and services nuclear reactors for power producers in the U.S.