Brookfield to acquire American Equity for $4.3bn

October 2023 | DEALFRONT | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

October 2023 Issue

The latest private capital manager looking to expand in credit investing, insurance holding company Brookfield Reinsurance is to acquire all of the outstanding shares of common stock of annuities provider American Equity Investment Life Holding Company (AEL) in a cash and stock transaction that values AEL at approximately $4.3bn.

Under the terms of the definitive agreement, each AEL shareholder will receive $55 per AEL share, consisting of $38.85 in cash, which represents a 35 percent premium to AEL’s last closing price on the New York Stock Exchange before news of a possible takeover bid from Brookfield emerged.

Already owning a 20 percent stake, Brookfield first invested in AEL in 2020 via a strategic partnership which included a reinsurance transaction. In 2021, the corporation officially launched its reinsurance entity – Brookfield Reinsurance – which in October 2021 announced the completion of this transaction.

“Given the complementary nature of AEL’s leading fixed annuity business to our existing platform, we expect to accelerate growth in collaboration with our distribution partners and employees while continuing to meet the needs of our policyholders and other stakeholders,” said Jon Bayer, managing partner at Brookfield. “Under its current leadership, AEL has been transformed into an innovative, asset light insurer that is positioned for growth, and we look forward to building on our successful partnership.”

With the acquisition of AEL, Brookfield has deployed or committed over $10bn of capital since its inception, bringing its total insurance assets to over $100bn. The company intends to remain well-capitalised and commit to meeting the needs of its policyholders and clients.

Brookfield Reinsurance also intends to continue AEL’s focus on alternative asset strategies and expects BAM will manage a significant portion of AEL’s assets. As a result, AEL will gain access to BAM’s leading direct origination platforms and asset management capabilities while maintaining its current high-quality bias and investment grade focus.

“We are pleased to have reached this agreement with Brookfield Reinsurance and believe this transaction provides an excellent outcome for all AEL shareholders, policyholders and other stakeholders,” said Anant Bhalla, president and chief executive of AEL. “The significant premium that will be delivered to shareholders as a result of this transaction is a testament to our strong performance and AEL’s successful transformation into an asset light insurer and asset manager.”

Brookfield’s and AEL’s boards of directors unanimously approved the merger agreement.

Serving as lead financial adviser to Brookfield is Barclays with BMO Capital Markets also acting as an adviser. Serving as legal adviser to Brookfield is Cravath, Swaine & Moore LLP with Debevoise & Plimpton LLP serving as insurance counsel. Serving as financial advisers to AEL are Ardea Partners and JP Morgan, with Sullivan & Cromwell LLP acting as legal adviser.

The merger is expected to close in the first half of 2024, subject to approval by AEL shareholders and other closing conditions customary for a transaction of this type, including receipt of insurance regulatory approvals in relevant jurisdictions and the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

“The transaction represents an opportunity for AEL shareholders to remain invested in a market leading global alternative asset manager,” concluded Mr Bhalla. “I could not be more excited about the potential opportunities for our people and benefits for policyholders as part of a preeminent global financial institution.”

Fraser Tennant