Takeover deals such as last month’s $560 million acquisition of Bentall Kennedy Group by Sun Life Financial need a special set of circumstances to occur. Indeed, that was exactly the case with the two parties, as PERE has learned in an interview.
Steve Peacher, president of Sun Life Investment Management, explained how the group had emerged from the global financial crisis easily intact, and last year had begun its asset management business as one of four pillars of business focus. Moreover, it found itself with a check book ready to make very large acquisitions after the group sold its US annuity business and certain life insurance lines to Guggenheim Partners for $1.35 billion in August 2013 as part of a strategy to reduce its risk profile. With a healthy balance sheet, it went about beefing up asset management via a modest acquisition of a New York-based fixed income manager last year, but buying Bentall Kennedy to become its real estate investment management platform is the big one as far as the company is concerned.
“The opportunity to acquire Bentall Kennedy came along at just the right time,” said Peacher. “It was timely not least because we have a fair amount of excess capital within Sun Life. We are very serious about moving these asset management businesses we have formed, and we were interested in something that would really move the needle for us. Bentall Kennedy offers us a chance to get into the big leagues immediately.”
Bentall Kennedy, which is also based in Canada, is a large real estate operation with around $27 billion of real estate assets in Canada and the US together with 1,400 staff. When combined with Sun Life Investment Management’s existing real estate and mortgage business, the combined RE group – which is retaining and trading under the Bentall Kennedy name – has $47 billion of assets.
Gary Whitelaw, group chief executive officer, explained how since 2001 Bentall Kennedy’s ownership structure had been split roughly in thirds between management, and two institutions; British Columbia Investment Management Corporation (bcIMC) and the California Public Employees’ Retirement System (CalPERS). Said Whitelaw: “Everyone recognized that was a fairly narrow base, and we wanted something more sustainable and diversified.” And so, the company put into place a strategic plan to expand its offer and nowadays has some 550 clients and investors around the world. “They recognized we had executed on our growth plan and were at an inflexion point,” said Whitelaw.
And so, all the parties agreed to pursue a more “conventional structure” – meaning one owner, and a highly-regarded global institution for whom asset management was a core business. Sun Life, whose properties had been managed by Bentall Kennedy in Canada for many years, turned out to be that institution.