Apollo, the global investment manager and Athene, a retirement services company, have entered into a definitive agreement to merge in an all-stock transaction that implies a total equity value of roughly $11 billion for Athene.
The merger is expected to be substantially accretive and bolster the earnings power of the combined company to more than double Apollo’s reported earnings in 2020.
The terms of the arrangement will see each outstanding Class A common share of Athene be exchanged for a fixed ratio of 1.149 shares of Apollo common stock.
Apollo, together with some of its related parties and employees, currently owns roughly 35% of the outstanding Athene Class A common shares.
Once the 100% stock-for-stock deal completes, current Apollo shareholders will own approximately 76% of the combined company on a fully diluted basis, and Athene shareholders will hold roughly 24%.
Following the merger, it’s expected that the stronger capital base and complete alignment will enable the combined firm to rapidly scale asset and liability origination, expand distribution channels and act as a leading global solutions provider.
The combined entity will be led by incoming Apollo Chief Executive Officer (CEO), Marc Rowan. Apollo’s business will continue to be led by Co-Presidents Scott Kleinman and James Zelter. Apollo states that there will be change to the platform, day-to-day portfolio management or investment processes and approvals.
Athene will continue to be led by CEO Jim Belardi with his current management team and full workforce. Once the merger closes there will be no change to Athene’s platform, investment processes or approvals.
The Board of Directors of the new company will be a diverse, 18 member Board that is two-thirds independent. Four directors of Athene are expected to join the combined company Board, including Jim Belardi. While Chairman Leon Black, Co-Founder Josh Harris, and Lead Independent Director Jay Clayton, will continue to serve in their respective roles.
Rowan, Apollo Co-Founder and incoming CEO, 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.”
Black, Apollo’s Founder and Chairman, said: “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.”
While Apollo Co-Founder, Harris, added: ‘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.”
More details on the agreement reveal that the deal is intended to qualify as a tax-free transaction for U.S. federal income purposes. The key benefits from the merger will come from increased coordination and alignment, not consolidation.
Athene’s Belardi, said: “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.”
Other highlights include a $1.60 annual dividend following closing with increase based on growth of the business; the fact Apollo will proceed with conversion to a simplified structure; the creation of a $29 billion pro forma market cap company; the deal establishes permanency of Athene’s AUM to Apollo and organic integration of Apollo’s value-add services to Athene; low execution risk between complementary businesses and management teams; and positive for credit rating agencies and policyholders across both companies.
Subject to approval of shareholders of both Apollo and Athene, along with regulatory and other customary closing conditions, the merger is expected to close in January of 2022.