Brookfield Business Partners (BBU): Unlocking Value Through Strategic Repositioning and Accretive Capital Recycling

In the current economic climate, where macroeconomic uncertainty and sector-specific challenges persist, Brookfield Business Partners (BBU) stands out as a masterclass in disciplined capital allocation. The company's second-quarter 2025 earnings report, coupled with its aggressive capital recycling initiatives and strategic repositioning, offers a compelling case for investors seeking undervalued industrial infrastructure plays. By examining BBU's financial performance, its navigation of the NAV discount, and its proactive approach to value creation, we uncover a story of resilience and calculated reinvention.

Q2 2025 Earnings: A Tale of Resilience and Rebalancing

Brookfield Business Partners delivered a mixed but telling performance in Q2 2025. Net income attributable to unitholders rose to $26 million, or $0.12 per unit, reversing a $20 million loss in the same period in 2024. Adjusted EBITDA grew 13% year-over-year to $591 million, driven by the Industrials segment's 44% surge to $307 million, bolstered by a $71 million tax recovery and robust energy storage operations. The Business Services segment also showed strength, with a 12% increase to $205 million, albeit partially offset by reduced contributions from its dealer software division.

However, the Infrastructure Services segment faced headwinds, reporting $109 million in EBITDA—a 30% decline—due to the divestiture of its offshore oil shuttle tanker operations in January 2025. This selective shedding of non-core assets underscores BBU's commitment to portfolio optimization, even if it means short-term volatility in earnings.

Strategic Repositioning: Capital Recycling as a Catalyst

The true narrative of BBU's Q2 lies not in its earnings but in its capital recycling. In July 2025, the company sold a partial interest in three of its businesses to Brookfield Asset Management's new evergreen private equity fund. For this, BBU received $690 million in fund units at an 8.6% discount to NAV. While this discount might initially seem concerning, it reflects a strategic trade-off: by monetizing portions of its portfolio, BBU gains liquidity to reinvest in higher-return opportunities while retaining a stake in the fund's future growth.

This move is emblematic of a broader trend in industrial investing—leveraging private equity-like structures to unlock value in public vehicles. The 18-month redemption window for these units further aligns with BBU's long-term capital management goals, ensuring flexibility to redeploy proceeds as opportunities arise.

Closing the NAV Discount: Buybacks and Liquidity

The market price of BBU units has averaged $25 in recent months, a figure that now appears increasingly attractive in light of the company's $2.3 billion liquidity position (as of June 30, 2025). BBU's aggressive repurchase program, which has returned $157 million to unitholders since January 2025, signals management's confidence in the intrinsic value of the business. At $25 per unit, these buybacks directly address the NAV discount implied by the 8.6% discount on the partial interest sale.

Moreover, BBU's recent $1.3 billion acquisition of Antylia Scientific—a 26% stake for $168 million—and its $145 million investment in First National Financial's privatization demonstrate a disciplined approach to capital allocation. These acquisitions are not just about scale but about quality: Antylia's life sciences and environmental lab equipment align with secular growth trends, while First National Financial's residential mortgage focus taps into a stable, recurring revenue stream.

The Road Ahead: Balancing Growth and Value Preservation

With $2.9 billion in pro forma liquidity post-transaction, BBU is well-positioned to continue its dual focus on value creation and capital preservation. The company's upcoming $2.7 billion privatization of First National Financial, pending regulatory approvals, could further stabilize cash flows, while its industrial segment's emphasis on energy storage and advanced manufacturing positions it to benefit from the global transition to clean energy.

The key risk lies in the pace of macroeconomic normalization. If inflationary pressures ease more slowly than anticipated, BBU's Infrastructure Services segment may face margin compression. However, the company's proactive divestitures and asset-light model mitigate this risk, ensuring that its core operations remain insulated from cyclical downturns.

Investment Implications

For investors, BBU represents a rare combination of industrial expertise, strategic agility, and undervaluation. The 8.6% NAV discount on its recent capital recycling transaction, coupled with buybacks at $25 per unit, suggests that the market is not fully pricing in the company's long-term value. With a quarterly distribution of $0.0625 per unit (yielding ~1.0% at current prices) and a robust balance sheet, BBU offers both income and growth potential.

In a market where many industrial players are struggling to adapt to shifting demand, Brookfield Business Partners is rewriting the playbook. By embracing capital recycling, selective acquisitions, and a relentless focus on NAV per unit, BBU is not just closing the discount—it's unlocking a new paradigm for value creation in the industrial sector. For those willing to look beyond short-term volatility, the opportunity is clear.