Sun Life Financial Inc. (“Sun Life Financial”) (TSX: SLF) (NYSE: SLF) today announced that it intends to merge Bentall Kennedy, its leading North American real estate and property management firm which Sun Life Financial acquired in 2015, with GreenOak Real Estate (“GreenOak”), a global real estate investment firm with approximately $14 billion (US$11 billion) in assets under management and nine offices globally. Sun Life Financial will acquire a majority stake in the combined Bentall Kennedy and GreenOak entity that will be named Bentall GreenOak and be part of Sun Life Investment Management. Senior management of Bentall GreenOak will include executives from both Bentall Kennedy and GreenOak.
“This transaction is right on strategy, broadening our asset management pillar by expanding the capabilities of our alternatives manager, Sun Life Investment Management,” said Dean Connor, President and CEO, Sun Life Financial. “Combining the strengths of two leading and globally respected real estate investment managers will bring Clients a broader range of investment solutions that include core, core plus and value add real estate1, plus senior and tactical real estate debt strategies across North America, Europe and Asia.”
Sun Life Financial will contribute its interest in Bentall Kennedy and pay GreenOak shareholders $195 million (US$146 million) in cash in exchange for a 56% interest in the combined Bentall GreenOak entity, with GreenOak shareholders holding the remaining interest. As part of the transaction, Sun Life will have an option to acquire the remaining interest in Bentall GreenOak approximately seven years from the closing. Sun Life Financial will also be acquiring the right to a portion of the GreenOak shareholders’ share of Bentall GreenOak net income in exchange for a fixed amount to be paid in quarterly installments. This will result in Sun Life Financial having the rights to approximately 90% of Bentall GreenOak earnings prior to the Company exercising its option to increase its ownership level.
“Combining Bentall Kennedy with GreenOak extends our capabilities in real estate investment solutions, in a complementary way and increases Sun Life Investment Management’s total assets under management to $75 billion,” said Steve Peacher, President, Sun Life Investment Management. “Bringing together these two highly experienced teams provides a breadth of strategies and market reach which will uniquely position Bentall GreenOak to serve its Clients.”
The common shareholders’ equity of Sun Life Financial will be reduced by approximately $730 million when the transaction closes, from the establishment of a liability reflecting the present value of the expected settlement price on the purchase of the remaining interest of Bentall GreenOak2. The ultimate settlement price will reflect the success of the combined Bentall GreenOak entity.
The transaction is expected to be accretive to underlying earnings per share and return on equity in 2019 by $0.04 and 60 bps, respectively3. The transaction will be financed through surplus cash, resulting in a reduction of one point in the Life Insurance Capital Adequacy Test (LICAT) ratio of Sun Life Financial (no impact on the LICAT ratio of Sun Life Assurance Company of Canada). The transaction is expected to close in the first half of 2019, subject to receipt of regulatory approvals and satisfaction of customary closing conditions.
Berkshire Global Advisors served as financial advisor and Weil, Gotshal & Manges LLP as legal advisor to Sun Life.
Slides related to this announcement are available at https://www.sunlife.com