Apollo reabsorbs Athene in a total deal that values ​​his company at $ 11 billion

It also represents the latest step in Apollo’s proposal to improve his government following revelations of ties between co-founder and chief executive Leon Black and the unfortunate financier Jeffrey Epstein.

The move comes as Apollo co-founder Marc Rowan, the firm’s architect of insurance strategy, prepares to take on the role of CEO. Black said in January that he would step down after a board review of his ties to Epstein, who committed suicide in his Manhattan prison cell in 2019 after being charged with federal sex trafficking charges in what underage girls participated.

The investment firm has recently announced several governance changes, including the appointment of more independent directors. Apollo said Monday that its board had voted to abandon the firm’s dual-class shareholding structure and adopt a “one-share, one-vote” regime, a move it had said it was considering and that expects to pave the way for its inclusion in the S&P 500 index.

Each outstanding Class A share of Athene will be exchanged for 1,149 shares of Apollo, reflecting a premium of approximately 16.5% over Athene’s closing price on Friday.

The stock deal will cause Apollo’s shareholders to own approximately 76% of the combined company, and Athene’s investors to own the rest.

The deal would double the profits reported by Apollo in 2020, the companies said. Shareholders will receive a fixed annual dividend of $ 1.60 per share.

Apollo hopes the efforts will help bolster its stock price, which has raised investors’ concerns about whether Mr. Epstein’s bonds. Black would prevent pension funds and other image-conscious institutions from investing more money in their funds. Apollo currently manages more than $ 450 billion and set a goal in 2019 to reach $ 600 billion in five years.

Shares of Apollo fell nearly 4% Monday morning, while Athene rose about 8%.

Investors have long been concerned about Apollo’s reliance on Apollo as its largest asset management client, accounting for approximately 40% of assets under management and generating approximately 30% of its related revenue. with the commissions.

For Athene, the combination is the latest evolution since it was founded in 2009 with the support of Apollo. The insurer has become one of the largest holders of fixed annuities in the country, a retirement savings product favored by those at risk and, in many cases, Americans.

Athene was built under the former executive chairman of American International Group Inc. James Belardi who, funded by Apollo, acquired blocks of business fixed income at an economic price after the financial crisis. The investment firm was hired to choose investments that would support Athene’s obligations to pay consumers.

Belardi quickly turned the Athens, which was a new driver, into one of the main drivers of consolidation in the U.S. life insurance industry, acquiring tens of billions of dollars in assets. Last year it had $ 150 billion in net assets invested.

It went public in 2016 and had a market capitalization of just over $ 10 billion before the merger plans were announced.

In Athene’s early years, Apollo owned 17%, but controlled 45% of the vote in a deal that led some potential insurer shareholders to slow down due to concerns about conflicts of interest. . Apollo in 2019 increased its stake in Athene to 35% and eliminated the supervisory shares of the insurance company. Athene also had a 7% stake in Apollo.

In a conference call to discuss the deal, Belardi, now president and CEO of Athene, said the insurer had a strong 2020 despite the coronavirus pandemic. Still, he said, “despite all our success and the many competitive advantages we have, it is clear and quite unfortunate” that some shareholders have been wary of buying the shares. The merger is the “logical next step” for Athene to address those concerns and be stronger and more solvent, he said.

Athene’s focus on fixed annuities, which pay interest to buyers over a period of years, coincides with Apollo’s experience in credit investing. Insurers make a profit by investing in products that guarantee products more than what they pay their customers. State insurance department guidelines direct insurers toward investor-quality securities, but companies have some leeway in creating their portfolios.

Over the past decade, many insurers have unloaded their annual businesses at discounted prices, as ultra-light interest rates in the United States since the global financial crisis have made it harder to make money.

Athene has been at the forefront of catching the wreckage. Working with Apollo as an asset manager, the concept was that he could make more money by investing customers ’money than traditional insurers, thanks to the greater access he enjoys to so-called higher-yielding alternative investments.

Athene has also become a major insurer in a growing business called pension risk transfer, in which employers with old-age pension plans reduce agreements with insurers to take responsibility for the monthly benefits of retirees.

—Dave Sebastian has contributed to this article.

Write to Miriam Gottfried to [email protected] and Leslie Scism at [email protected]