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Brookfield offers to buy insurer American Equity for $4.3 billion

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Brookfield has offered to buy American Equity Investment Life for $4.3 billion, making it the latest private equity manager looking to expand into credit investing by adding annuities and life insurance assets.

The AEL board has lifted a “standstill”[ads1]; provision that allows Brookfield to buy more company shares than the 20 percent stake it already owns, according to a securities filing on Tuesday. According to a letter from Brookfield addressed to the AEL board in the filing, a final deal could be signed by the end of this week.

AEL, based in West Des Moines, Iowa, is one of the few independent annuity operators left amid a wave of consolidation and has more than $70 billion in total assets. Private equity groups have acquired similar businesses as they aim to expand their investable assets.

Under the terms of the proposed transaction announced Tuesday, Brookfield’s publicly traded insurance affiliate, Brookfield Reinsurance, will buy AEL shares for cash and stock for $55 each, an implied premium of 35 percent to Friday’s closing price. Almost $40 of the consideration per share will be in cash, with the remainder paid in shares of Brookfield Asset Management, a publicly traded subsidiary of Brookfield.

A deal would end a public row that erupted last year, when a Brookfield executive resigned from the AEL board and criticized the company’s chief executive, Anant Bhalla, for what he said was a “fundamental change in the strategic direction of AEL”.

The insurer had entered into a multibillion-dollar reinsurance deal with private equity startup 26North, founded by longtime Apollo executive Josh Harris. AEL had also bought a $250 million stake in 26North. Brookfield required AEL to explain the circumstances surrounding the 26North transactions which it suggested were ill-conceived by Bhalla.

AEL hit back at Brookfield, calling the Canada-based group a “direct competitor” that could not remain on its board because it is buying a Texas-based life insurer, American National, for $5 billion in 2022.

AEL had long been coveted by investment managers as one of the last major “fixed-indexed” annuity dealers whose customer premiums could be invested in complex corporate loans and other interest-bearing assets in addition to traditional bonds. In 2020, AEL had rejected an unsolicited joint bid from Apollo’s Athene unit, which had partnered with MassMutual.

At that time, Brookfield bought a stake in AEL and entered into a reinsurance pact, which gave the asset manager responsibility for managing billions in AEL customer liabilities.

Bhalla took the helm of AEL in early 2020 and had implemented a strategy he called “AEL 2.0” in which the company partnered with several alternative asset managers to invest more aggressively in clients’ funds.

Amid corporate governance turmoil late last year, AEL faced yet another unsolicited bid from Prosperity Life, a life insurance company owned by Elliott Management. Prosperity dropped the $4 billion offer in early 2023 after AEL’s 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 asset management industry consolidates.

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