Apollo responds to Athens in a total offer worth $ 11 billion

It also represents the latest step in Apollo’s effort to improve its management following the revelation of ties between co – founder and CEO Leon Black and the infamous financier Jeffrey Epstein.

The move comes as Apollo co – founder Marc Rowan, the architect of the company’s insurance strategy, is preparing to take on the role of CEO. Mr. Black said in January he would retire in the wake of a review of his board with Epstein, who killed himself in his 2019 prison cell in Manhattan after being charged with charges of federal sex trafficking with underage girls.

The investment firm has recently announced a number of changes in management, including the appointment of more independent directors. Apollo said Monday that its board had voted to abandon the firm’s dual-class share structure and adopt a ‘one-share-only’ regime. ‘in the S&P 500 index.

Each outstanding Class A share in Athens is exchanged for 1,149 shares of Apollo, reflecting a premium of approximately 16.5% above Athens’ closing price on Friday.

The total deal will result in Apollo shareholders owning about 76% of the combined company, while Athens investors own the rest.

The deal will more than double the reported earnings of Apollo in 2020. Shareholders receive a fixed annual dividend of $ 1.60 per share.

Apollo hopes the efforts will help boost the share price, which has been marked amid investors’ concerns about whether Black’s Epstein bonds will deter image-conscious pension funds and other institutions from investing more money in its funds. Apollo currently manages more than $ 450 billion and sets it in 2019 to bring it to $ 600 billion within five years.

Shares of Apollo fell nearly 4% on Monday morning, while Athens rose about 8%.

Investors have long been frustrated about Apollo’s dependence on Athens as its largest asset management client, representing about 40% of assets under management and generating about 30% of its fee-related revenue.

For Athens, the combination is the latest evolution since its inception in 2009 with Apollo’s support. The insurer has grown into one of the country’s largest holders of fixed annuities, a retirement savings product preferred by risk takers and in many cases older Americans.

Athens was built under the former CEO of American International Group Inc., James Belardi, who, funded by Apollo, acquired cheap blocks with fixed annuity after the financial crisis. The investment firm has been contracted to select investments to support Athens’ obligations to pay consumers.

Mr. Belardi quickly made emerging Athens a major driver for consolidation in the U.S. life insurance industry, raising tens of billions of dollars in assets. As of last year, he has invested $ 150 billion in net invested assets.

It became known in 2016 and had a market capitalization of just over $ 10 billion before the merger plans were announced.

In the early years of Athens, Apollo owned 17%, but controlled 45% of the votes in an arrangement that some prospective shareholders in the insurer abandoned due to concerns about conflicts of interest. Apollo increased its stake in Athens to 35% in 2019, eliminating the insurance company’s election shares. Athens also took a 7% stake in Apollo.

Belardi, now Athens’ chairman and chief executive, told a conference to discuss the deal, saying the insurer had a strong 2020 despite the coronavirus pandemic. Still, he said, “despite all our success and the many competitive advantages we hold, it is clear and rather unfortunate” that some shareholders were cautious about buying the stock. The merger is the “logical next step” for Athens to address these issues and become stronger and more credible, he said.

Athens’ focus on fixed annuities – which pay buyers interest over a period of time – is in line with Apollo’s expertise in credit investing. Insurers earn by earning more on investments that support the products than they end up paying out to their customers. Guidelines for government insurance departments steer insurers toward investment grade bonds, but companies have some room to build their portfolios.

Over the past decade, many insurers have turned down their annuity businesses at lower prices because the low interest rates in the US since the global financial crisis have made it harder to make money.

Athens was in the vanguard to pick up the pieces. The concept was that Apollo, as its asset manager, would be able to earn more money to invest customers’ money than traditional insurers could, thanks to the greater access to so-called alternative investments with a higher return.

Athens has also become a prominent insurer in a growing business called pension risk transfer, in which employers with old-fashioned pension plans cut off with insurers to take responsibility for pensioners’ monthly benefits.

—Dave Sebastian contributed to this article.

Write to Miriam Gottfried at [email protected] and Leslie Scism at [email protected]