American Equity Investment Life Holding Co. confirmed that it plans to start a new partnership with Brookfield Asset Management Inc., after rejecting a proposed takeover of $ 3 billion from Athens Holding Ltd. and Mutual life insurance in Massachusetts
American Equity said in a statement that under the partnership, Brookfield would acquire a 19.9% stake in the insurer for approximately $ 37 or a 15% premium for the place where its shares closed on Friday. Brookfield will also take a seat on the board of American Equity as part of the agreement, the companies said in separate statements, confirming an earlier report by Bloomberg News.
“This compelling strategic deal that we have been discussing with Brookfield since March demonstrates the significant shareholder value we create through the implementation of our AEL 2.0 strategy,” said Anant Bala, CEO of American Equity, in statement.
American Equity also formally rejected an offer to take over $ 36 a share from Athene and MassMutual on the grounds that it underestimated the company and was opportunistic. American Equity said it believed its current strategy would increase long-term shareholder value.
Representatives Athene and MassMutual were not immediately available for comment.
Shares of American Equity ended Friday at $ 32.20 per share in New York, with the company valued at about $ 2.97 billion. Shares of the company have risen by almost 47% since the day before the proposed takeover by Athene and MassMutual was announced publicly 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 reinsure Brookfield to $ 10 billion in existing and future annuity obligations, they added.
At the same time, American Equity said it would launch a $ 500 million share repurchase program to offset the dilution that the deal would have on existing holders due to the issuance of Brookfield common stock.
The partnership will be Brookfield’s biggest foray into insurance to date. Last month, Bruce Flatt, CEO of Brookfield, said on Investors Day that he believed it was time to expand into the sector with interest rates at zero. Over time, he said, the insurance sector could be a $ 100 billion to $ 200 billion business for his company.
“We are pleased to invest in American Equity and partner with the reinsurance business as it grows its leading position as a provider of annuity retirement plans,” said Sachin Shah, Brookfield’s Chief Investment Officer. statement. “This transaction represents a significant investment for us in the attractive US insurance market, and we believe that our alternative asset strategies can provide long-term value to the company.”
Brookfield currently has about $ 550 billion in assets under management, according to its website.
Expanding US equity
The partnership with Brookfield will be an extension of American Equity’s AEL 2.0 strategy under Bhalla. American Equity also announced an agreement with Varde Partners and Agam Capital Management last month as part of this strategy.
American Equity revealed earlier this month that it was considering an offer from Athena, which is backed by Apollo Global Management Inc. and MassMutual. As part of the proposed deal, MassMutual will receive American Equity insurance companies and employees and then reinsure most of Athens’ business. In addition, Athens will acquire the holding company and assume the entire debt of American Equity.
American Equity, which was among the top 20 sellers of fixed annuities in the United States in the second quarter, is a common target of deal speculation. Athens withdrew from talks with the insurer last year, a person familiar with the matter had said earlier.