© BloombergBruce Flatt, chief executive officer of Brookfield Assest Management Inc., speaks during a Bloomberg Television interview at the Milken Institute Global Conference in Beverly Hills, California, U.S., on Monday, April 29, 2019. The conference brings together leaders in business, government, technology, philanthropy, academia, and the media to discuss actionable and collaborative solutions to some of the most important questions of our time.
(Bloomberg) -- American Equity Investment Life Holding Co. confirmed it plans to launch a new partnership with Brookfield Asset Management Inc. after rejecting a proposed $3 billion takeover from Athene Holding Ltd. and Massachusetts Mutual Life Insurance Co.
American Equity said in a statement that under the partnership, Brookfield will acquire a 19.9% stake in the insurer for roughly $37, or a 15% premium on where its shares closed Friday. Brookfield will also take a seat on American Equity's board as part of the arrangement, the companies said in separate statements, confirming an earlier report by Bloomberg News.
"This compelling strategic transaction, which we have been discussing with Brookfield since March, demonstrates the substantial shareholder value we are creating through execution of our AEL 2.0 strategy," said Anant Bhalla, American Equity's chief executive officer, in the statement.
American Equity also formally rejected a $36-a-share takeover proposal from Athene and MassMutual on the grounds that it undervalues the company and is opportunistic. American Equity said it believes its current strategy will maximize long-term value for shareholders.
Representatives Athene and MassMutual weren't immediately available for comment.
Shares in American Equity closed Friday at $32.20 a share in New York, valuing the company at roughly $2.97 billion. The company's shares have climbed almost 47% since the day before the proposed takeover from Athene and MassMutual was made public Oct. 1.
Brookfield, one of the world's largest alternative asset managers, will make the investment in two tranches, the second half of which would be completed in early 2021, the companies said. The deal will also see Brookfield reinsure as much as $10 billion in existing and future annuity liabilities, they added.
American Equity said it would concurrently launch a $500 million share buyback program from the proceeds of the investment to offset the dilution the deal will have on existing holders because of the issuance of common shares to Brookfield.
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The partnership will be Brookfield's largest foray yet into insurance. Last month, Bruce Flatt, Brookfield's chief executive officer, said at an investor day that he believed the time was right expand into the sector with interest rates at zero. Over time, he said, the insurance sector could be a $100 billion to $200 billion business for his firm.
"We are pleased to be investing in American Equity and to partner with the business in reinsurance as it grows its leading position as a retirement-planning annuity provider," said Sachin Shah, Brookfield's chief investment officer, in a statement. "This transaction represents a meaningful investment for us in the attractive U.S. insurance market and we believe our alternative asset strategies can deliver long-term value to the company."
Brookfield currently has roughly $550 billion in assets under management, according to its website.
American Equity Expansion
The partnership with Brookfield would be an expansion of American Equity's AEL 2.0 strategy under Bhalla. American Equity also announced an agreement with Varde Partners and Agam Capital Management last month as part of that strategy.
American Equity disclosed at the beginning of this month that it was reviewing the offer from Athene, which is backed by Apollo Global Management Inc., and MassMutual. As part of the proposed deal, MassMutual would get American Equity's insurance units and employees and then reinsure the bulk of the business to Athene. In addition, Athene would acquire the holding company and assume all of American Equity's debt.
American Equity, which was among the top 20 sellers of fixed annuities in the U.S. during the second quarter, has been a frequent target of deal speculation. Athene had walked away from talks last year with the insurer, a person familiar with the matter previously said.
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