American Equity Investment Life Holding Co. confirmed. that it plans to launch a new partnership with Brookfield Asset Management Inc. after rejecting a proposed $ 3 billion acquisition from Athene Holding Ltd. at Massachusetts Mutual Life Insurance Co.
American Equity said in a statement that under the partnership, Brookfield will take a 19.9% stake in the insurer for approximately $ 37, or a 15% premium where its shares closed on Friday. Brookfield will also take a seat on the American Equity board as part of the deal, the companies said in a separate statement, confirming an earlier Bloomberg News report.
“This compelling strategic transaction, which we have been discussing with Brookfield since March, demonstrates the enormous amount of shareholder we have created through the implementation of our AEL 2.0 strategy,” said Anant Bhalla, chief executive officer of American Equity, in statement.
American Equity has also formally rejected a proposal to take a $ 36-a-share from Athene and MassMutual on the grounds that it undervalues the company and opportunists. American Equity said it believes this current strategy will maximize long-term value for shareholders.
Representatives Athene and MassMutual are not immediately available for comment.
Shares in American Equity closed on Friday at $ 32.20 a share in New York, costing the company nearly $ 2.97 billion. The company’s shares have risen nearly 47% since the day before the proposed takeover from Athene and MassMutual went public October 1.
Brookfield, one of the largest alternative asset managers in the world, will make investments in two stocks, the second half of which will be completed by early 2021, the companies said. The deal also reflects Brookfield’s reinsure of up to $ 10 billion in existing and future annuity responsibilities, they added.
American Equity said at the same time it is launching a $ 500 million share sharing program from investment proceeds to offset the dilution of the agreement with existing holders due to the provision of common shares in Brookfield.
The partnership will be Brookfield’s largest foray until insurance. Last month, Bruce Flatt, Brookfield’s chief executive officer, told investors one day that he believed it was the right time to expand the sector with a zero interest rate. 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 billing business as it assumes its leading position as a retirement planning provider,” Sachin Shah, Brookfield’s chief investment officer, told a statement. “This transaction represents a significant investment for us in the attractive US insurance market and we believe our alternative asset strategies could deliver long-term value to the company.”
Brookfield currently has approximately $ 550 billion in assets under management, according to its website.
Expanding American Equity
The Brookfield partnership will be an extension of American Equity’s AEL 2.0 strategy under Bhalla. American Equity also announced an agreement with Partner with Varde and Agam Capital Management last month as part of that strategy.
American Equity announced earlier this month that it was reviewing an offer from Athene, backed by Apollo Global Management Inc., and MassMutual. As part of the proposed deal, MassMutual will acquire American Equity insurance units and employees and then reassure the volume of business in Athene. In addition, Athene will take over the holding company and take over all American Equity debt.
American Equity, which was among the top 20 sellers of fixed annuities in the US in the second quarter, was often the target of speculation in the deal. Athene walked away from last year’s talks with the insured, someone familiar with the matter previously said.