Apollo Global Management Inc. is doubling down on its investment in Athene Holding Ltd., increasing its stake to 35% and deepening the ties between the two firms.
Apollo will acquire approximately 35.5 million common shares of Athene for about $1.55 billion, the companies said in a statement. Athene will also purchase a 7% equity stake in Apollo. The two firms are using a stock swap for the deal. Athene shares had the biggest gain since August 2018.
“By nearly doubling our economic interest in Athene to approximately 35%, we are reinforcing the durability of our relationship, and enhancing the strong alignment between the two companies,” Apollo Co-founder Leon Black said in the statement.
Apollo established Athene in 2009 and built it into one of the top fixed-annuity providers in the U.S. In 2016, the insurer raised $1.08 billion in an initial public offering. Athene has become an essential fixture in Apollo’s financial apparatus. It has also made Apollo the envy of private equity rivals, who have since tried to build up their own insurance businesses.
The insurer allows the private equity firm to collect money from annuity holders — what’s known as “permanent capital” — and invest the assets in the credit funds, distressed debt and buyouts for which Apollo is better known. Athene accounts for about 25% of Apollo’s overall value and provides Apollo with lower borrowing costs than a typical bank.
Athene will have a single share class structure following the transaction, which is expected to close in the first quarter of next year. That could help the insurer’s chances of being included in major stock indexes like the S&P 500. The private equity firm will hold on to 5 out of 15 of Athene’s board seats, according to the companies.
The deal speaks to “Apollo’s interest in the insurance sector because Athene is currently raising a sidecar, so they’re invested in that more now because of the increased ownership,” John Barnidge, an analyst at Sandler O’Neill & Partners LP, said in an interview Monday.
Jim Belardi, chairman and chief executive officer of Athene said: “This transaction will remove a material impediment to additional index inclusion and strengthen our corporate governance profile by aligning voting rights with the economic interests of all shareholders.”
Athene was represented by Sidley Austin LLP as legal counsel and the special committee of Athene’s board was represented by Latham & Watkins LLP. Apollo was represented by Paul, Weiss, Rifkind, Wharton & Garrison LLP and the conflicts committee of Apollo’s board was represented by Simpson Thacher & Bartlett LLP.