Canadian investment giant swoops for British pensions in £2bn deal
Toronto-based Brookfield will begin 'providing advice on Just's investment strategy, support for Just's investment risk and portfolio management, and related management services'.
It will also kick off a review of Just Group's £27bn of assets, and 'may look to reposition such assets and/or transition management of such assets to Brookfield Asset Management.'
FTSE 250 member Just Group sells annuities to pensioners, offers products including lifetime mortgages, and buys pension schemes from other providers. It manages assets totalling £27bn and has more than 700,000 customers.
Brookfield's move comes as global investors bet that relatively high interest rates will encourage final salary pension schemes to sell up to companies like Just Group. Many companies would rather offload the liabilities associated with a final salary scheme to a specialist provider like Just Group.
Brookfield hopes to take a bigger slice of so-called pension risk transfer market, with £40bn to £50bn of deals taking place each year.
It comes weeks after the £5.7bn acquisition of Pension Insurance Corporation (PIC) by European insurer Athora.
Andreas Van Embden, analyst at Peel Hunt, said the 'consistent flow' of deals in the bulk purchase annuity market was attracting international attention.
'The pension industry's deficit has significantly narrowed and many funds have a surplus, so it is more attractive to do deals now - they are better priced and the market is more competitive,' he said.
'So transfer volumes will continue at more favourable pricing for trustees. And rising interest rates make individual annuities more attractive, because you get a higher income in later life.'
Instead of seeking to grow organically, 'it makes much more sense to buy a specialist in the UK - Just Group - put capital behind it and try to grow the business,' he said.
At the same time the Canadian parent may be able to invest the pension assets more profitably.
'Annuity companies are desperate to get access to alternative assets and high-yielding assets - Brookfield could help there,' said Mr Van Embden.
Brookfield, which previously employed Mark Carney, the former Governor of the Bank of England and now prime minister of Canada, established a UK unit called Blumont earlier this year to compete in the market. It will merge the entity with Just Group.
Sachin Shah, chief executive of Brookfield Wealth Solutions, said the deal would help the company grow on this side of the Atlantic.
'The acquisition of Just will accelerate our growth ambitions for the UK, a core region for us given its status as one of the world's pre-eminent pension markets combined with highly attractive investment opportunities,' he said.
The £2.4bn purchase price represents a premium of 75pc to Just Group's share price before the deal was announced. Shares surged 67pc on confirmation of the deal.
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