The two firms together will have approximately $475 billion of assets under management and $2.5 billion of annual fee-related revenue.

In a surprising move, Brookfield Asset Management, Canada’s largest alternative investment firm, has agreed on a deal with Howard Marks' Oaktree Capital Group to purchase a 62-percent stake in the company. 

The deal, which is expected to be completed in the third quarter of the year, ends almost two decades of independence for Marks and co-chairman Bruce Karsh, who together managed $120 billion in AUM. However, Oaktree will continue to retain a degree of autonomy as the two firms would continue to operate their respective businesses independently, with each remaining under its current brand and led by its existing management and investment teams, according to the press release published on Wednesday.

«This transaction enables us to broaden our product offering to include one of the finest credit platforms in the world, which has a value-driven, contrarian investment style, consistent with ours,» Bruce Flatt, Brookfield CEO said.

The sale comes at a time when Oaktree's stock has underperformed the broader market, down 13 percent in the past five years, during which the S&P 500 has grown in 50 percent and Blackstone's share price has grown 4 percent. According to Reuters, Brookfield approached Oaktree about the deal sometime during the fall season. At a fee of about $4.8 billion, the offer represents a premium of 12.4 percent per Oaktree Class A unit based on its closing price on March 12.

Blackstone Rival

Brookfield focuses on private equity, infrastructure and renewable power, while Oaktree focuses on distressed debt, which comprises 70 percent of its assets under management. As a result of the deal, the alternative asset manager will have a combined $475 billion of assets under management, rivaling industry leader Blackstone, which had $472 million in AUM at the end of 2018. 

«The opportunity to join forces with Brookfield is ideal. Our firms share a culture that emphasizes both investing excellence and integrity, and our businesses mesh without overlapping or conflicting,» Marks, co-chairman of Oaktree, said.

The remaining 38 percent of Oaktree is largely owned by its founders, certain members of management and employees. A liquidity schedule was agreed as part of the deal – former employee unit-holders will be able to sell their Oaktree holdings to Brookfield from 2022. The earliest year in which Brookfield can own 100 percent of Oaktree is 2029.