American Equity Investment Life Holding Co. has confirmed its intention to launch a new partnership withBrookfield Asset Management Inc. after rejecting $ 3 billion buyout proposalAthene Holding Ltd. etMassachusetts Mutual Life Insurance Co.
American Equity said in a statement that as part of the partnership, Brookfield will acquire a 19.9% stake in the insurer for about $ 37, or a 15% premium on where its shares closed on Friday. Brookfield will also serve on the board of directors of American Equity in connection with the arrangement, the companies said in separate statements, confirming an earlier report from Bloomberg News.
“This compelling strategic transaction, which we have been discussing with Brookfield since March, demonstrates the substantial shareholder value we are creating through the execution of our AEL 2.0 strategy,” said Anant Bhalla, CEO of American Equity, in thedeclaration.
American Equity has also officially rejected a proposed buyout of $ 36 per share of Athene and MassMutual on the grounds that it undervalues the company and is opportunistic. American Equity said its current strategy will maximize long-term shareholder value.
Representatives Athene and MassMutual were not immediately available for comment.
American Equity shares closed at $ 32.20 a share in New York on Friday, valuing the company at around $ 2.97 billion. The company’s shares have climbed almost 47% since the day before the Athene buyout plan and MassMutual was made public on October 1.
Brookfield, one of the world’s largest alternative asset managers, will make the investment in two tranches, the second half of which will be completed in early 2021, the companies said. The deal will also allow Brookfield to reinsure up to $ 10 billion of existing and future annuity liabilities, they added.
American Equity said it will simultaneously launch a $ 500 million share repurchase program from the proceeds of the investment to offset the dilution the transaction will have on existing holders due to the issuance of common stock at Brookfield.
The partnership will be Brookfield’s biggest foray into insurance to date. Brookfield CEO Bruce Flatt told an Investor Day last month that he believes the time is right to expand in the industry with zero interest rates. Over time, he says, the insurance industry could represent a $ 100 billion to $ 200 billion business to his business.
“We are pleased to invest in American Equity and to partner with the reinsurance company as it strengthens its leadership position as a provider of retirement planning annuities,” said Sachin Shah, Chief Investment Officer from Brookfield, in adeclaration. “This transaction represents a significant investment for us in the attractive US insurance market and we believe our alternative asset strategies can provide long-term value to the company.
Brookfield currently has around $ 550 billion in assets under management, according to its website.
Expansion of U.S. equities
The partnership with Brookfield would be an extension of American Equity’s AEL 2.0 strategy under Bhalla. American Equity also announced an agreement withVarde Partners etAgam Capital Management last month as part of this strategy.
American Equity revealed earlier this month that it is reviewing Athene’s offer, backed by Apollo Global Management Inc. and MassMutual. As part of the proposed deal, MassMutual would get the insurance units and employees of American Equity, then reinsure most of the business to Athene. In addition, Athene would acquire the holding company and assume all of the debt of American Equity.
American Equity, which was among the top 20 sellers of fixed annuities in the United States during the second quarter, has often been the target of trading speculation. Athene dropped out of talks with the insurer last year, a person familiar with the matter has already said.