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Brookfield has offered to acquire American Equity Investment Life for $4.3 billion, becoming the latest private money manager looking to expand its credit investments by adding retirement and life insurance investments.
AEL’s board has lifted a “standstill” clause allowing Brookfield to acquire more shares in the company than the 20 percent stake it already owns, according to a securities statement filed on Tuesday. According to a letter from Brookfield to the board of AEL included in the filing, a definitive contract could be signed by the end of this week.
Headquartered in West Des Moines, Iowa, AEL is one of the few independent annuity providers still in a wave of consolidation and has more than $70 billion in total assets. Private equity groups have been buying up similar companies to expand their investable assets.
Under the terms of the proposed transaction announced Tuesday, Brookfield’s public insurance subsidiary Brookfield Reinsurance would acquire AEL shares for cash and shares for $55 each, an implied premium of 35 percent over Friday’s closing price. Nearly $40 of the consideration per share is to be paid in cash, with the remainder to be paid in shares of Brookfield Asset Management, a Brookfield publicly traded subsidiary.
A deal would end a public row that erupted last year when a Brookfield executive resigned from AEL’s board and criticized the company’s chief executive, Anant Bhalla, for what he described as a “fundamental change in AEL’s strategic direction”. .
The insurer had inked a multi-billion dollar reinsurance deal with private start-up equity firm 26North, founded by longtime Apollo executive Josh Harris. AEL had also acquired a $250 million stake in 26North. Brookfield asked AEL to explain the circumstances of the 26North transactions, which he felt were poorly thought out by Bhalla.
AEL hit back at Brookfield, calling the Canada-based group a “direct competitor” that cannot remain on the board for acquiring a Texas-based life insurer, American National, for $5 billion in 2022.
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AEL has long been coveted by investment managers as one of the last major ‘fixed index’ annuity dealers whose client premiums could be invested in complex corporate loans and other fixed income assets alongside traditional bonds. In 2020, AEL had rejected an unsolicited joint bid from Apollo’s Athena unit, which had been working with MassMutual.
At that time, Brookfield acquired an interest in AEL and entered into a reinsurance deal that gave the asset manager responsibility for managing billions of dollars in AEL customer liabilities.
Bhalla took charge of AEL in early 2020 and implemented a strategy he dubbed “AEL 2.0” in which the company worked with several alternative wealth managers to invest clients’ funds more aggressively.
Amid the corporate governance turmoil late last year, AEL faced another unsolicited offer from Prosperity Life, a life insurer owned by Elliott Management. Prosperity dropped this $4 billion offer in early 2023 after the AEL board rejected it.
Brookfield last year listed a minority stake in BAM to unlock its public market value and create a currency to make purchases as the wealth management industry consolidates.