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Instant Analysis: Brookfield Asset Management Makes a Play for Rouse Properties

By Eric Volkman - Jan 21, 2016 at 4:41PM

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The unsolicited offer is for $17 per share, which would total around $657 million.

What happened?
Brookfield Asset Management (BAM 5.52%) is going to the mall, almost literally. The Canada-based company has made an unsolicited offer, on behalf of one of the real estate funds it manages, for Rouse Properties (NYSE: RSE). The target company is a specialty real estate investment trust that operates shopping malls. Brookfield has offered $17 per common share of the REIT, which it says is 26% higher than the stock's closing price on Jan. 15. That price is to be paid entirely in cash, and it will total around $657 million.

Brookfield Asset Management's affiliated company, Brookfield Property Partners (BPY), already has a large (33%) stake in Rouse Properties, along with its affiliates. Brookfield Property Partners would keep its shares if the transaction goes through.

Rouse Properties has formed a special committee of directors, and retained outside advisors, to help it evaluate the buyout offer. It said it intends to do so "promptly."

Does it matter?
If it goes through, the deal will substantially affect all three entities involved. Rouse Properties shareholders would reap a quick and substantial gain on their stock. Meanwhile, Brookfield Asset Management would add Rouse Properties' 35 malls to its portfolio, and by paying that premium, it would increase the value of the stake held by Brookfield Property Partners.

Brookfield Asset Management clearly believes in the future of bricks-and-mortar retail, even as concerns grow of an economic slowdown, and the erosion of traditional retailing against e-commerce. It's an interesting bet and one that the company can afford to place; that $657 million it'll end up spending on Rouse Properties is relatively low compared to its cash position, which at the end of its Q3 topped C$6.8 billion ($4.7 billion).

Eric Volkman has no position in any stocks mentioned, and neither does The Motley Fool. 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.

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Stocks Mentioned

Brookfield Asset Management Inc. Stock Quote
Brookfield Asset Management Inc.
BAM
$52.97 (5.52%) $2.77
Brookfield Property Partners Stock Quote
Brookfield Property Partners
BPY

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