Brookfield Business Partners LP and Institutional Partners to Acquire US Auto Parts Manufacturer DexKo Global Inc. for US $ 3.4 Billion as Part of Strategy to Acquire and Improve High Performing Companies in the Industry industrial.
The investment announced Monday is the latest addition to Brookfield’s portfolio of industries, infrastructure and business services. The company claims to have $ 600 billion in assets under management, of which $ 22 billion is invested in the industrial sector.
Michigan-based DexKo produces parts for trailers and towing vehicles, including axles, frames, shocks and brakes. The company employs more than 6,000 people at 50 production sites, according to a statement. Formed by the merger in 2015 of Dexter and AL-KO Vehicle Technology, DexKo now operates in North America, Europe and Australia.
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Brookfield, a division of Brookfield Asset Management of Toronto, acquires the company from private equity firm KPS Capital Partners LP.
Cyrus Madon, CEO of Brookfield Business Partners, said the acquisition is in line with a strategy to buy companies with excellent margins and strong returns on capital.
He said DexKo is attractive because it is highly integrated, which means it controls production as well as distribution, and because the company presents opportunities for growth.
“Due to the nature of the people they sell to, their cash flow is very sustainable,” Mr. Madon said. “What we’ve discovered over the decades is that buying this type of business generates consistently high returns for our investors. “
Typically, Brookfield Business Partners acquires businesses, helps them grow, and sells them at a profit many years later. The company has deployed around $ 780 million in capital over the past year, generating $ 675 million in revenue, according to a report from the company.
Brookfield’s investment will be funded by equity capital of approximately US $ 1.1 billion, of which Brookfield Business Partners intends to invest approximately US $ 400 million. The balance of the equity investment will be financed by institutional partners. Before or after closing, a portion of Brookfield Business Partners’ engagement may be syndicated to other institutional investors.
The funding will be led by a syndicate of banks comprising Credit Suisse, Deutsche Bank, BMO Capital Markets, Bank of America, Goldman Sachs and RBC Capital Markets. Davis Polk & Wardwell LLP is acting as legal counsel to Brookfield.
The deal comes after Brookfield announced on Sunday that it had acquired UK-based Modular Group for US $ 5 billion. The company maintains approximately 260,000 modular units, used on construction sites, for schools and as temporary offices, in 25 countries. Mr. Madon called it another excellent margin expansion opportunity.
Modulaire is backed by the private equity firm TDR Capital. Brookfield’s investment will be funded with approximately $ 1.6 billion in equity and the company intends to contribute approximately $ 500 million to the acquisition, with the balance being funded by institutional partners, the company said.
Madon says that while industrial and commercial services will continue to be the focus of the company’s investments, the company is now also focused on exploring investments in the technology and healthcare sectors.
“As we grow we want to expand the universe of potential businesses that we can buy. We’ve made a concerted effort to get into healthcare and tech, and now we have teams that are focused uniquely on each industry, ”Madon said. “This is where we should see strong growth for both Brookfield’s private equity business and Brookfield’s business partners. “
Madon said the company also plans to expand its investments geographically into China and Japan.
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