Sun Life Financial Inc. SLF has closed the buyout of a majority stake in BentallGreenOak for cash. The acquisition will help the leading life insurer widen its global real estate investment footprint. This will be part of Sun Life Investment Management.
Sun Life had acquired Bentall Kennedy, a North American real estate and property management firm in 2015, which it subsequently merged with GreenOak Real Estate, a global real estate investment firm with $11 billion in assets under management. Sun Life named it BentallGreenOak.
Sun Life Investment Management is a business unit of one of the pillars of Sun Life Asset Management. Sun Life remains focused on investing in Sun Life Investment Management, its $66 billion alternative investments business. The addition of BentallGreenOak will increase Sun Life Investment Management's total assets under management to $75 billion.
BentallGreenOak will be the real estate arm of Sun Life’s institutional asset management business, SLC Management and add to its capabilities. The buyout will not only expand Sun Life Investment Management’s assets under management but also enhance its services.
The transaction is also estimated to be accretive to underlying earnings per share by 4 cents and return on equity by 60 basis points in 2019. However, the Life Insurance Capital Adequacy Test (LICAT) ratio of Sun Life Financial will be lowered by one point. Also, Sun Life’s common shareholders' equity will be lowered by about $730 million.
Sun Life Financial paid shareholders $146 million in cash in exchange for a 56% interest in the combined BentallGreenOak entity. Sun Life also has an option to acquire the remaining interest in BentallGreenOak about seven years from the closing. Sun Life Financial will also have the right to a portion of shareholders' share of BentallGreenOak net income against a fixed amount to be paid in quarterly installments. Thus, Sun Life will have rights to about 90% of BentallGreenOak earnings, prior to exercising its option to increase its ownership level.
Sun Life is aggressively growing its Asset Management Business with 1 trillion assets under management already. Sun Life Investment Management boosts its investment capabilities in private fixed income, mortgages and real estate by investing in pension plans and other institutional investors. This development further strengthens Sun Life’s asset management capabilities.
Sun Life considers acquisitions a prudent approach to ramp up its growth profile. Strategic buyouts have positioned it as the second-largest dental network in the United States, consolidated its footprint in Vietnam, Indonesian and India and expanded its wealth business in Hong Kong.
Shares of this Zacks Rank #4 (Sell) company have rallied 25.5% year to date, outperforming the industry’s increase of 21.4%. Focus on expansion of Asia business and global asset management business, favorable business mix, strategic acquisitions and solid capital position should help the stock retain the momentum.
There have been a number of acquisitions in the insurance space of late given the significant capital available. Brown & Brown of Kentucky, Inc., a subsidiary of Brown & Brown, Inc. BRO, acquired United Development Systems, Inc. The Hartford Financial Services Group, Inc. HIG acquired The Navigators Group, Inc. In its effort to expand outside the United States, Arthur J. Gallagher & Co. AJG has agreed to acquire a minority stake in Renomia a.s.
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