A division of Brookfield Asset Management launched last year to invest in business and industrial service companies has led a $908 million majority acquisition of Brazil's largest private water distribution and treatment company.
Brookfield Business Partners, Sumitomo Corporation and other undisclosed investors partnered to purchase a 70 percent stake in Odebrecht Ambiental, a business operating 26 water treatment and sewage companies in Brazil. In total, Brookfield is investing $340 million for a 26 percent stake and Sumitomo is taking a 14 percent stake for $250 million.
FI-FGTS, the investment arm of the country's national severance guarantee fund, sold its interest in Odebrecht Ambiental, but will retain a 30 percent stake. Brookfield said the company will be renamed BRK Ambiental.
The deal calls for the buyers to pay $768 million for a controlling interest in a company that provides industrial water treatment for around 17 million people and an additional $140 million to fund operations and support growth. If the business achieves certain performance milestones over the three years after the close of this deal, FI-FGTS will receive 350 million reais ($115 million; €101 million at today's exchange rate).
Along with the BRK Ambiental acquisition, Brookfield and its institutional investors are purchasing a direct interest in a joint venture holding related water distribution and treatment assets for $116 million.
Brookfield Business Partners launched last June as a public vehicle of the $227 billion asset manager that invests in 'out-of-favour' sectors and businesses with high barriers to entry and low production costs, according to the company's website. It seeks returns of at least 15 percent on investments.
According to Brazil's National Sanitation Information System, 83 percent of the population has access to utility water services and 50 percent has access to sewage services. Cyrus Madon, chief executive of Brookfield Business Partners, said he was “encouraged by the number and scale of growth opportunities”.
“We believe BRK Ambiental can capture a growing share of the water and sewage improvements planned in Brazil over the next two decades, supporting strong and stable returns for Brookfield Business Partners,” he said.