Sun Life Financial (SLF) Acquires Majority Stake in InfraRed

Sun Life Financial Inc. SLF has acquired 80% stake in InfraRed Capital Partners ("InfraRed") per the agreement, which it had entered into in December 2019.

London, U.K. based InfraRed is a leader in global infrastructure investing in both greenfield and brownfield projects, including renewable energy. It caters to clients across London, Hong Kong, New York, Seoul and Sydney. The company has been an active real estate investor and manager for 25 years and focuses on assets, which suit its management style, targeting well-located, multi-let properties in shopping center, industrial and office sectors across Europe.

InfraRed manages $12 billion of equity capital in multiple private and listed funds, primarily for institutional investors across the globe.It currently manages over 175 infrastructure assets and its renewable energy portfolio has a generation capacity of around 1GW.

Sun Life has acquired the majority stake in InfraRed for a consideration that includes a closing payment of approximately $390 million. The owners of InfraRed will have a put option to sell their remaining interest to Sun Life in 2024 and Sun Life will have the option to call any remaining interest by the end of 2025.  

Per the transaction, Sun Life has committed to co-invest $400 million, which includes general account investments, in order to support the launch of InfraRed investment solutions

Rationale Behind the Deal

The buyout of the majority stake in InfraRed is expected to boost investment solutions of Sun Life's alternatives asset management business, SLC Management, for institutional clients to include infrastructure equity and advance sustainable investment options.

SLC Management will leverage the global infrastructure capabilities of InfraRed to aid its public and private fixed income investments. It eyes opportunities in infrastructure investing as well as renewable infrastructure such as wind farms and solar energy in North America.

Sun Life Financial’s Asset Management business group comprises MFS Investment Management and SLC Management, which is an institutional investment management business that delivers liability driven investing, alternative fixed income and real estate solutions to clients, with operations around the world.

As far as InfraRed is concerned, this buyout will enable it to extend its capabilities in North America and provide support to its continued evolution, including the launch of a North American renewable infrastructure fund.

Inorganic Growth Story

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.

At the beginning of the third quarter of 2019, Sun Life acquired majority stake in BentallGreenOak, which increased global real estate investment footprint, as well as added organizational depth and a full spectrum of solutions including equity and debt real estate strategies.

During October 2019, the Zacks Rank #3 (Hold) insurer entered into a 15-year bancassurance partnership with Tien Phong Commercial Bank (TPBank). The collaboration provided Sun Life Vietnam with ready access to TPBank’s network of 2.5-million customers. The deal is intended to expand Sun Life’s distribution reach in Vietnam and in turn Asia. The deal is part of Sun Life’s thrust to strengthen distribution capabilities in higher growth markets.

Price Performance

Shares of the third largest insurer in Canada have lost 13.7% in the past year compared with the industry’s decline of 22.6%. Focus on expansion of Asia business and global asset management business, favorable business mix, strategic acquisitions and solid capital position should help the stock sustain momentum.

There have been a host of acquisitions in the insurance space of late, given the significant capital available. In May 2020, Brown & Brown BRO acquired Loan Protector Insurance Services. Recently, Marsh & McLennan Companies’ MMC unit Oliver Wyman acquired a minority stake in Corridor Platforms and Arthur J. Gallagher & Co. AJG has closed buyout of Cunnington & Associates, Inc. and Barrett, Liner & Buss, LLC.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Hottest Tech Mega-Trend of All

Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Marsh McLennan Companies, Inc. (MMC) : Free Stock Analysis Report
 
Sun Life Financial Inc. (SLF) : Free Stock Analysis Report
 
Arthur J. Gallagher Co. (AJG) : Free Stock Analysis Report
 
Brown Brown, Inc. (BRO) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.