American Equity accepts Brookfield's $4.3B takeover

(Bloomberg) --American Equity Investment Life Holding Co. accepted a $4.3 billion cash and stock takeover bid from an arm of Canadian investment giant Brookfield. 

Brookfield Reinsurance Ltd. agreed to buy all the shares in the US insurer it does not already own for $55 apiece, according to a statement on Wednesday. The offer represents a 35% premium to American Equity's closing price on June 23, the last full trading day before Bloomberg revealed Brookfield's interest. 

The deal to snap up one of the last remaining independent annuities providers in the US boosts Brookfield Reinsurance's assets under management to around $100 billion. In recent years, private equity heavyweights ranging from Blackstone Inc. to KKR & Co. and Apollo Global Management Inc. have invested in such companies as a way of gathering more capital they can plow into alternative assets. 

Shares of American Equity have gained 13% in New York this year, giving the company a market value of about $4 billion. The stock rose as much as 5.1% in pre-market trading on Wednesday.

Acquisition Streak

Brookfield has emerged as the world's most acquisitive investment firm this year as the biggest private equity funds slow down amid a dearth of financing. The Canadian group agreed in June to buy Middle Eastern payment processor Network International Holdings Plc for £2.2 billion ($2.8 billion), and it's leading a consortium that struck an A$18.7 billion ($12.5 billion) deal for Australia's Origin Energy Ltd.

Read More: Brookfield Trumps Buyout Titans With $50 Billion Deal Spree

A transaction would cap several years of takeover interest in American Equity from various suitors and add to the $16 billion of acquisitions of insurance companies announced globally over the past 12 months, data compiled by Bloomberg show. Brookfield Reinsurance is already the biggest shareholder in West Des Moines, Iowa-based American Equity with a roughly 20% stake, according to regulatory filings. 

"Under its current leadership, AEL has been transformed into an innovative, asset light insurer," Brookfield Reinsurance Managing Partner Jon Bayer said in the statement. "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."

Brookfield Reinsurance's bid includes $38.85 per share in cash plus $16.15 per share in class A stock of Brookfield Asset Management Ltd. It plans to continue American Equity's push into alternative assets and would have Brookfield Asset Management oversee a large part of the company's portfolio. 

Ardea Partners and JPMorgan Chase & Co. are advising American Equity. Barclays Plc is lead financial adviser to Brookfield Reinsurance, with BMO Capital Markets also providing advice. 

Alternative Assets

In December, American Equity rejected an unsolicited offer of $45 per share from rival insurer Prosperity Life Insurance Group that was backed by hedge fund Elliott Investment Management. Prosperity Life said in February it was withdrawing the proposal after American Equity refused to engage.

Before news of Brookfield's interest emerged, shares of American Equity had gained roughly 60% under the tenure of Chief Executive Officer Anant Bhalla, a former MetLife Inc. and American International Group Inc. executive who took the helm in early 2020. He's been striking annuity deals with asset managers as a way to create a diversified portfolio and increase yield on its investments, part of a strategy dubbed "AEL 2.0."

American Equity has announced partnerships with 26North Partners, the private equity firm started by Apollo co-founder Josh Harris, as well as alternative asset manager Varde Partners and Agam Capital Management. It's also been ramping up its allocations to private assets.

American Equity has long been a takeover candidate. It attracted a bid in 2020 from Massachusetts Mutual Life Insurance Co. and Apollo's Athene Holding Ltd. American Equity averted that deal by selling a stake to Brookfield, which also signed a multiyear agreement to reinsure as much as $10 billion in existing and future annuity liabilities.