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Yes, things are afoot at the Brookfield series of companies. Brookfield Properties (NYSE: BPO) is carving out its Residential unit, which will be combined into Brookfield Homes (NYSE: BHS). This newly united entity will be renamed Brookfield Residential Properties.

As consideration, Brookfield Properties will get 50.7% of the new business and about $480 million in promissory notes from it. Then Brookfield Properties will conduct a rights offering that spins out the new shares at the price of $10 per stub. Based on the expected total shares outstanding of 101.5 million for Brookfield Residential Properties, it prices the new business at just over $1 billion.

Shareholders of Brookfield Homes will get about 0.765 shares in the new company for every share of Homes, and Homes stockholders will own about 49% of the new company, or about $490 million in market cap. With Brookfield Homes trading at a market cap of just over $300 million, it looks on the surface like there's room to make some money.

But the twist is that Homes has a huge chunk of convertible preferred stock that will become Brookfield Homes shares just before the merger. So Brookfield Homes, as it now stands, is pricing the new entity at about $1.34 billion – above the price for the new company that the rights offering implies. So Homes shares look overpriced relative to the $10 shares investors will get in the rights offering. If you believe Brookfield Residential Properties will be a star because of the transaction, then you might still be getting a bargain by buying Homes.

Still, the transaction does make the new Brookfield Residential Properties profitable. The combination of the money-losing Homes and the profitable Residential unit of BPO – with $163 million in operating profit in the last four quarters – makes the combined business into a money-maker that could be attractive. And that seems to be one of the aims of Brookfield Asset Management (NYSE: BAM), which will own between 66% and 91% of the new business, depending on the outcome of the new offering.

This type of transaction is exactly what I'm analyzing as part of my Special Situations portfolio at the Motley Fool. Have any further insight into what's happening with this transaction?

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Jim Royal, Ph.D., owns shares Brookfield Asset Management. Brookfield Asset Management is a Motley Fool Global Gains selection. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.