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Sun Life Financial to merge Bentall Kennedy with GreenOak Real Estate

Sun Life Financial Inc. plans to merge its North American real estate and property management division, Bentall Kennedy, with global property investor GreenOak Real Estate LP.

GreenOak and Bentall Kennedy, which includes Bentall Kennedy (U.S.) LP and Bentall Kennedy (Canada) LP, serve more than 700 institutional clients with roughly C$62 billion in assets under management as of Sept. 30.

Sun Life is set to acquire a 56% stake in the combined Bentall GreenOak entity by contributing its interest in Bentall Kennedy and paying GreenOak shareholders C$195 million in cash. GreenOak shareholders will hold the remaining interest in the combined business.

The Canadian insurance company also has an option to acquire the remaining interest in Bentall GreenOak roughly seven years after the completion of the deal.

In addition, Sun Life will purchase the right to a portion of GreenOak shareholders' share in Bentall GreenOak's net income in exchange for a fixed sum to be distributed quarterly. As a result, Sun Life will have rights to about 90% of the new entity's earnings prior to exercising its option for the remaining stake.

The transaction is also expected to reduce Sun Life's common shareholder equity by approximately C$730 million.

Steve Peacher, President of Sun Life Investment Management, expects the deal to extend the company's capabilities in real estate investment solutions, adding that it increases Sun Life Investment Management's total assets under management to C$75 billion.

Executives from both Bentall Kennedy and GreenOak will serve as senior management of Bentall GreenOak, which will become part of Sun Life Investment Management, the insurer said in a release. Bentall Kennedy CEO Gary Whitelaw will become the CEO of the combined entity, and Sonny Kalsi will serve as president. John Carrafiell will become senior managing partner of the Bentall GreenOak UK/European business, according to a separate release from Bentall Kennedy.

The deal is anticipated to close in the first half of 2019, subject to regulatory approvals and satisfaction of customary closing conditions. Sun Life will use its surplus cash to finance the transaction.

Berkshire Global Advisors served as financial adviser, while Weil Gotshal & Manges LLP acted as legal adviser to Sun Life.

Evercore served as financial adviser to GreenOak and Fried Frank Harris Shriver & Jacobson LLP and Covington & Burling LLP provided legal advice to GreenOak and its owners.