Brookfield Business Partners Buys Westinghouse Electric in $4.6 Billion Deal

Toshiba frees itself of bankrupt company

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Jan 04, 2018
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Brookfield Business Partners LP (BBU, Financial) (TSX:BBU.UN, Financial) announced Thursday it is buying bankrupt Westinghouse Electric Co. from Toshiba Corp. (TSE:6502, Financial) for $4.6 billion.

The Canadian business services company said it and other institutional partners will fund the deal using $1 billion of equity and $3 billion of long-term debt financing. As part of the deal, Brookfield will also assume “certain pension, environmental and other operating obligations.”

Brookfield CEO Cyrus Madon said the acquisition is beneficial as Westinghouse is “a high-quality business that has established itself as a leader in its field.”

“We look forward to bringing our significant expertise and reputation as a long-term owner and operator of critical infrastructure in the U.S. and globally, as well as our deep facilities management capabilities, to enhance the Company’s position as a leading global infrastructure services provider to the power generation industry,” he said.

Brookfield also argued that Westinghouse’s diversified customer base and strong reputation for innovation make it a good purchase. It noted the company’s profitability is derived from “regularly scheduled services” under long-term contracts.

The Pennsylvania-based nuclear services company filed for bankruptcy in March after accumulating billions of dollars in losses due to delays and cost overruns at nuclear power plants it was constructing in Georgia and South Carolina, dealing a huge blow to its Japanese parent company. Toshiba bought Westinghouse in 2006 for $5.4 billion.

In addition to regulatory approval, the transaction must be approved by the bankruptcy court. The deal is expected to close in the third quarter.

Following the announcement, Brookfield Business Partners’ U.S.-listed shares were up more than 3% Thursday morning at $35.71. GuruFocus estimates the stock gained approximately 44% in 2017.

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Toshiba gained 1.89% on Thursday in the Japanese market. According to GuruFocus, the stock gained approximately 12% in 2017.

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Disclosure: I do not own any stocks mentioned.