Tetragon Financial Group (TFG) has announced that its GreenOak Real Estate joint venture is to merge Bentall Kennedy, which it describes as Sun Life Financial Inc.’s leading North American real estate and property management firm. The combined entity will be named Bentall GreenOak and will be part of Sun Life Investment Management. The merger is subject to attaining the required regulatory approvals. TFG says that it expects the merger to close by the end of the first half of 2019. TFG says that Bentall GreenOak will remain a key strategic investment of TFG Asset Management (Tetragon’s diversified alternative asset management business that owns majority and minority private equity stakes in asset management companies).
GreenOak shareholders to receive US$146m in cash as part of the merger
As part of the merger, Sun Life Financial has agreed to contribute its interest in Bentall Kennedy and pay GreenOak shareholders US$146m in cash in exchange for a 56% interest in the combined entity of Bentall GreenOak. GreenOak Co-Founders, John Carrafiell and Sonny Kalsi, TFG Asset Management and existing GreenOak senior management will hold 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.
Merger values Bentall GreenOak at U.S.$940m
The merger values Bentall GreenOak at U.S.$940m. Tetragon will receive approximately US$42.5m upon the closing of the merger. TFG Asset Management will continue to own nearly 13% of the combined entity and will receive a series of fixed quarterly payments as well as a portion of Bentall GreenOak’s earnings over the next seven years. Alongside other GreenOak owners and team members, TFG Asset Management will retain its current ownership of carried interest in existing GreenOak funds and will participate in carried interest in new Bentall GreenOak funds.
4% uplift to TFG NAV
TFG’s NAV as at 31 October 2018 was US$2.08 billion. TFG says that, taking into account the GreenOak merger and other portfolio gains and losses through 30 November 2018, it is estimated that Tetragon’s NAV will increase by approximately 4%, with the GreenOak valuation uplift portion being reflected in December.
TFG to serve on Bentall GreenOak’s board
TFG Asset Management will serve on the Board of Directors of Bentall GreenOak, will continue to participate in investment committees for funds in which TFG Asset Management will hold carried interest and expects to invest in new Bentall GreenOak funds.
Combined Bentall GreenOak investment platform to serve over 700 institutional clients
TFG says that the combined Bentall GreenOak investment platform will serve over 700 institutional clients with approximately US$47 billion in assets under management. It says that Bentall GreenOak will offer a broad range of complementary real estate investment strategies that include Core, Core Plus and Value Add/Opportunistic equity, as well as senior and tactical real estate debt strategies.
TFG tender offer
TFG says that it intends to conduct a tender offer for a number of Tetragon non-voting shares with a maximum value of up to US$50m , to be held as treasury shares. J.P. Morgan Securities plc (which conducts its U.K. investment banking business as J.P. Morgan Cazenove) will act as dealer manager in the tender offer, which will use a modified Dutch auction structure. Details of this planned tender offer will be announced shortly. TFG says that a repurchase of its shares at a price below NAV will be accretive to its fully diluted NAV per share.
About Tetragon Financial Group
Tetragon Financial Group describes itself as a closed-ended investment company that invests in a broad range of assets, including bank loans, real estate, equities, credit, convertible bonds, private equity, infrastructure and TFG Asset Management, a diversified alternative asset management business. Where appropriate, through TFG Asset Management, it seeks to own all, or a portion, of asset management companies with which it invests in order to enhance the returns achieved on its capital.
Tetragon’s investment objective is to generate distributable income and capital appreciation. It aims to provide stable returns to investors across various credit, equity, interest rate, inflation and real estate cycles. The company is traded on Euronext in Amsterdam N.V. and on the Specialist Fund Segment of the main market of the London Stock Exchange. More information is available at its website: www.tetragoninv.com.