Brookfield makes $4.3B bid for insurer American Equity

(Bloomberg) --An arm of Canadian investment giant Brookfield has made a cash and stock bid for American Equity Investment Life Holding Co. valuing the insurance firm at about $4.3 billion.

Brookfield Reinsurance Ltd. is proposing to buy all the American Equity shares it doesn't already own for $55 apiece, according to a statement Tuesday. The offer represents a 35% premium to American Equity's closing price on Friday, the last full trading day before Bloomberg News reported Brookfield's interest. 

American Equity's board will review the proposal with advisers. Brookfield said in a separate statement it's aiming to negotiate terms of a definitive agreement and announce a transaction by June 30. The bid includes $38.85 per share in cash plus $16.15 per share in class A stock of Brookfield Asset Management Ltd. 

Shares of American Equity surged in the final minute of regular trading Monday after Bloomberg reported Brookfield's interest, closing up 11% at $45.10 to give the company a market value of $3.5 billion. The shares rose as much as 15% in pre-market trading Tuesday.

A transaction would cap several years of takeover interest in American Equity from various suitors and add to the $15 billion in insurance company acquisitions 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. 

Alternative Assets

Brookfield Reinsurance said it plans to continue American Equity's focus on alternative asset strategies and would have Brookfield Asset Management oversee a significant portion of its assets. The transaction would give American Equity access to Brookfield Asset Management's origination capabilities and asset management expertise while "while maintaining the company's current high-quality bias and investment grade focus," according to Brookfield. 

Brookfield Reinsurance plans to acquire Brookfield Asset Management shares from the Canadian investment group's holding company, Brookfield Corp., to satisfy the stock portion of the bid. That setup would ensure the deal won't be dilutive to shareholders of any Brookfield entity. 

Ardea Partners and JPMorgan Chase & Co. are advising American Equity. 

Deal Synergies

"Annuity players like AEL are a natural fit for larger asset managers that are able to generate synergies in asset accumulation and portfolio management," analysts at Truist Securities wrote in a note. "Given the large number of players in the industry and AEL's modest market share, there should be no antitrust concerns." 

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 the latest share price jump, 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, which sells annuities and other insurance products, has long been a takeover candidate. It attracted a bid in 2020 from Massachusetts Mutual Life Insurance Co. and Apollo Global Management Inc.'s Athene Holding Ltd. American Equity averted that deal by selling a stake to Brookfield, which also signed a multiyear agreement to re-insure as much as $10 billion in existing and future annuity liabilities. 

--With assistance from Alexandra Muller.