No. of Recommendations: 17
Any chance someone would be kind enough to explain this to me in simpleton terms?The short answer is most shareholders would be wise to ignore it. On the off chance you have surplus brain cells you want to burn off, you can read the 128-page registration statement here:
https://otp.tools.investis.com/clients/us/brook_ba...The long answer is you are being offered an opportunity to exchange BN shares for BNRE shares on a 1-for-1 basis. And not just any BNRE shares. A brand-new species of BNRE shares, hitherto unknown, which will give Brookfield a nice, round 10 publicly-traded equity ticker symbols (not including preferred issues, closed-end funds, etc.).
But who's counting? The original BNRE shares have been exchangeable for BN shares since they came into existence way back in December 2022. That was when they changed the ticker from BAMR, begotten the previous year, because BAM was becoming BN and a whole new BAM was being born and they didn't want any confusion. But I digress.
The new BNRE shares will also be exchangeable for BN. This offer provides a one-time reverse exchange option -- BN for BNRE, instead of the other way around.
For Brookfield aficionados, there's a chef's kiss: The existing BNRE shares available on the Toronto and New York Stock Exchanges are identified as Class A shares. The new BNRE shares available in this offer are identified as Class A-1 shares. The ticker symbol Brookfield intends to use for these new shares is BNRE.A. Evidently, the remaining letters of the alphabet were otherwise engaged the day they made this decision. So BNRE.A will refer not to Class A shares, as the uninitiated might imagine, but to Class A-1 shares. As it happens, the explanation for this is audible only to dogs.
If you are a lowly retail shareholder, the most important fact to keep in mind is that the paired nature of these tickers means all of them -- BN, BNRE and the new, improved BNRE.A (set to make its debut Nov. 16) -- end up trading at similar prices. In effect, unless and until the original exchange provision is revoked, holding BNRE (or BNRE.A) is just another way of holding BN.
Why might you want another way of holding BN? From the registration statement:
We refer to Brookfield Reinsurance as a 'paired entity' to Brookfield Corporation because (i) the exchangeable shares (A) are exchangeable into Brookfield Class A Shares on a one-for-one basis and (B) receive distributions at the same time and in the same amounts as dividends on the Brookfield Class A Shares, and (ii) Brookfield Corporation owns 100% of the class C shares (as defined herein). These features enable the Offer to be structured so that the equity base and market capitalization of Brookfield Reinsurance can be enhanced without any dilution to Brookfield Shareholders. However, while the exchangeable shares provide Brookfield Shareholders the opportunity to hold their interest in overall Brookfield through the ownership of exchangeable shares, Brookfield Corporation and Brookfield Reinsurance are distinct legal entities and there are differences between the rights and privileges of holders of Brookfield Class A Shares and holders of our exchangeable shares. These differences may result in certain investors preferring to hold our exchangeable shares because Canadian and U.S. investors will have the opportunity to receive returns of capital instead of taxable dividends and non-Canadian investors will have the ability to receive distributions without the imposition of withholding tax. For a discussion of such differences under the governing documents of our company and Brookfield Corporation and laws of their respective jurisdictions of formation see Section 20 of the Circular, 'Comparison of Shareholder Rights'. See also Section 14 of the Circular 'Certain Material Canadian Federal Income Tax Considerations' and Section 15 of the Circular 'Certain Material United States Federal Income Tax Considerations'.In other words, while holding BN produces small taxable dividends (current yield 0.9%), holding BNRE may produce returns of capital in their place (meaning the distributions are not taxable but reduce your cost basis in the underlying security, producing larger capital gains, or smaller capital losses, when you sell), and may free you of withholding taxes on dividends if you happen to live in a tax haven.
Who might benefit from this option? Well, anyone with a yacht-load of BN so large that taxes on the small dividend add up to an annoying sum.
But why the new class of BNRE shares?
The class A-1 exchangeable shares being offered are non-voting in order to address, among other things, certain insurance regulations applicable to Brookfield Reinsurance, which generally prohibit any person from owning more than 10% of the voting shares of our company without having received the requisite regulatory approvals.And who, does one suppose, might be at risk of owning more than 10% of the Brookfield Reinsurance voting shares if the current offer were in the original Class A shares? A mystery, to be sure, but if the clue appeared on Wheel of Fortune, a canny contestant's first two guesses might be B and F.
Following the Offer, investors who desire to do so will have the right to convert their class A-1 exchangeable shares into class A exchangeable shares on a one-for-one basis, subject to the conditions described in more detail in this document. See Section 1 of the Circular, 'Information with respect to Brookfield Reinsurance ' Description of Our Share Capital', Section 5 of the Circular, 'Purpose of and Background to the Offer' and Section 10 of the Offer, 'Taking Up and Exchange of Tendered Brookfield Class A Shares'.So not to worry. Unless you are bumping up on that 10% ceiling, you can convert your BN shares into non-voting BNRE.A shares through this offer, then convert your non-voting BNRE.A shares into voting BNRE shares, and then register them at your condo in Bermuda so you don't have to pay taxes on the divvies.
At least, that's the way I read it. I could be wrong. You should probably consult an attorney.
