Apollo and Athene to merge in deal valued at $29bn

Private equity specialist Apollo Global and life and retirement reinsurance company Athene Holding Ltd. are set to merge, in a transaction that values the latter at $11 billion and the combined company at $29 billion, underscoring the attractive combination that is investing alongside life and annuity reinsurance premium float accumulation.

In an all-stock merger transaction, the companies said that after the $11 billion arrangement is completed, expected in early 2022, current Apollo shareholders will own roughly 76% of the combined company, while Athene shareholders will own roughly 24%.

The merger, “combines two growth companies providing products and services that are in high demand – investment returns and retirement income,” the companies said.

Adding that, “The stronger capital base and complete alignment will allow the company to rapidly scale asset and liability origination, broaden distribution channels and act as a leading global solutions provider. The company will operate in an environment powered by strong market and demographic trends.”

Apollo Co-Founder and incoming CEO Marc Rowan commented,, “This merger is all about alignment between Apollo and Athene, amongst Apollo’s stockholders and with our limited partners. For Apollo and Athene, we will have total alignment to optimize our strategy and allocate capital efficiently, which will include rapidly scaling our capability to originate attractive risk/reward assets, which are the limiter of growth for both firms. We have also created alignment among all our stockholders who will share in the upside of a larger, more liquid company with leading corporate governance. And it further aligns interests with our fund investors, giving us a bigger balance sheet to invest alongside clients in our various fund products.”

Apollo Founder and Chairman Leon Black added, “Apollo occupies an enviable position in our industry, and we have been keenly focused on how to evolve our differentiated platform for long-term success. The Apollo Athene combination is all about alignment, turbo charging growth initiatives and dramatically enhancing shareholder value. Apollo’s conversion to a simplified structure with a single class of common stock with equal voting rights and empowering the full Board with management responsibility of the business are also two significant steps towards these ends.”

Apollo Co-Founder Josh Harris also said, “This merger is an important and strategic step for our firm’s growth. Unlike mergers with a high degree of execution risk, this union cements the coming together of two firms that have maintained a close partnership for more than a decade. As a firm, we continue to demonstrate leadership, strategic differentiation and superior performance across our investment platform.”

Athene Chairman and CEO Jim Belardi stated, “Today’s announcement reflects the strength and strategic nature of our longstanding mutually beneficial relationship with Apollo – one which has already created enormous value for each other and our respective constituents. After carefully reviewing Athene’s options to unlock value for shareholders, Athene and Apollo determined that the potential of a fully aligned business would be significantly greater than a sum-of-the-parts. Coming together in this merger is a logical and exciting next step that will simplify our relationship while driving significant strategic and financial benefits in both the immediate and long-term future.”

The merger will create a company with a combined market capitalisation of around $29 billion, which is expected to be eligible for S&P 500 inclusion.

Importantly and this is one of the key reasons Apollo wants to secure Athene as its own for the future, the merger, “Establishes permanency of Athene’s AUM to Apollo and organic integration of Apollo’s value-add services to Athene, enabling both businesses to thrive symbiotically.”

It is this symbiotic relationship that has made both companies so successful and also delivered such huge amounts of assets to Apollo’s investment strategies as well.

Athene drives significant capital to Apollo, which Apollo then puts to work across its broad range of investments.

As our readers will be aware, in recent years the company has also found ways to leverage the appetite of third-party investors to drive even more premium and asset accumulation, through the use of its ACRA vehicle that acts like a reinsurance sidecar structure for the company.

The launch of ACRA demonstrated a whole new level of symbiosis for the companies, showing that by tapping some outside investor appetite the accumulation of assets could be accelerated, while not reducing the capital available to invest.

As a result, Apollo and Athene are building a life and annuities reinsurance giant that shows no signs of its asset accumulation slowing down.

The combined entity will be led by incoming Apollo CEO Marc Rowan and the main merger benefits are expected to be increased coordination and alignment, not consolidation, and not on personnel synergies, the firm said.

Apollo’s business will continue to be led by Co-Presidents Scott Kleinman and James Zelter, with no change to the platform, portfolio management on a day-to-day basis, or in the investment processes and approvals.

Athene’s CEO Jim Belardi will remain in charge along with his current management team and full workforce.

No changes to Athene’s platform, investment processes or approvals are expected and policyholder service, as well as being a leading provider of retirement savings products, and maintaining strong financial strength and regulatory relationships, are set to remain its goals.

The Board of Directors will have 18-members, two-thirds independent and with Chairman Leon Black, Co-Founder Josh Harris and Lead Independent Director Jay Clayton all continuing to serve in their respective roles.

Athene will provide four directors to the combined company Board, including Jim Belardi.