Brookfield Asset Management Inc. agreed to buy a majority stake in Oaktree Capital Group, a combination that would rival Blackstone Group as the world's largest alternative money manager.
Brookfield will acquire a 62% stake in Oaktree in a cash and stock deal worth roughly $4.7 billion, the companies said Wednesday in a statement.
The combined companies will have about $475 billion of assets under management and $2.5 billion of annual fee-related revenue. Blackstone had $472 billion of assets at year-end.
The deal will bolster the credit business of Brookfield, which traditionally has focused on real estate. It also provides Oaktree, a specialist in distressed debt, exposure to assets that thrive outside turbulent economic times.
The transaction enables the Toronto-based company to broaden its product offerings, especially as the world's largest institutional investors look to allocate billions of dollars to fewer firms, Brookfield CEO Bruce Flatt said in a phone interview.
"We had difficulty, up until now, meeting the strict terms of some of those mandates," Mr. Flatt said. "Very few firms in the world are able to do that."
Oaktree co-chairman Howard Marks said in the interview that the two firms mesh "culturally and in terms of product lines without competing and overlapping."
Brookfield, which approached Oaktree in October, will acquire shares of the Los Angeles-based firm for $49 in cash or 1.077 Brookfield shares, a 12.4% premium as of March 12.
Oaktree rose 12% to $49 at 12:02 p.m. in New York, the biggest gain since the company went public in 2012. Brookfield fell 0.2%.
Brookfield, founded 120 years ago, is Canada's largest alternative investment firm and owns companies ranging from real estate to infrastructure and renewable power. Iconic holdings include Manhattan West, the new complex at New York's Hudson Yards and Brookfield Place near Wall Street.
In the past year, the company acquired mall owner GGP Inc. for $13 billion, Forest City Realty Trust for $6.7 billion and a power solutions business from Johnson Controls for $13.2 billion.
Shares of Brookfield have been a stellar performer for decades, posting a 21% annual return since 2009, double the gain of the S&P/TSX Composite Index, Canada's main equity gauge.
Mr. Marks, Bruce Karsh and other partners founded Oaktree in 1995. The firm managed $120 billion in distressed debt, private-equity holdings, real estate, infrastructure and other equity assets as of Dec. 31. It has returned 78% since its initial public offering.
"We could see more M&A across the sector as aging founders of alternative managers seek a liquidity event and money managers bolster capabilities in alternatives," Morgan Stanley analysts led by Michael Cyprys said in a note to clients. "This could increase investor perception of strategic value across the sector."
KKR & Co. rose 1.8%, Carlyle Group gained 2.6% and Ares Management Corp. added 1.7%.
Under the terms of the deal, Brookfield could take over full ownership of Oaktree by 2029. The companies will continue to operate independently, with each keeping its brand and led by existing management. Mr. Marks, 72, will join Brookfield's board.
Perella Weinberg Partners was the sole financial adviser and Simpson Thacher & Bartlett and Munger Tolles & Olsen were legal advisers to Oaktree. Weil Gotshal & Manges and Torys represented Brookfield.