Brookfield Re strikes terms for AEL takeover & merger: $3.41bn bid cleared

Brookfield Reinsurance struck quick terms for its sought buy-out and merger with annuity provider American Equity Investment Life (AEL) and will proceed on its $3.41 billion bid for the roughly 80% it does not already own.

AEL apparently liked the offer it saw. The AEL board backed the Brookfield offer unanimously, calls it “in the best interests” of shareholders and encouraged all further approval.

“This transaction provides an excellent outcome for all AEL shareholders, policyholders and other stakeholders,” AEL’s CEO Anant Bhalla said of the deal, citing a “significant premium” on the deal’s pricing.

That 35% uplift to prior market pricing on AEL shares can be attributed to “strong performance and AEL’s successful transformation under the AEL 2.0 strategy into an asset light insurer and asset manager,” he said.

Brookfield is bidding on just over 62 million outstanding shares for which it is ready to pay $2.41 billion cash and the remaining $1 billion in shares of its parent, Brookfield Asset Management. The deal values the whole of AEL at $4.29 billion, a 35% premium to where shares traded before the late June announcement of the preliminary offer.

“This transaction represents an important step in the continued growth of our insurance business, further diversifying, and scaling, our insurance capabilities,” Brookfield Re CEO Sachin Shah (pictured) said.

Brookfield Re will see its total lifetime capital deployment break the $10 billion mark on the deal, bringing total insurance assets to over $100 billion.

Brookfield is putting a hefty portion of the sum into M&A, with a $1.1 billion cash purchase of Argo Group still in the works.

A merger with US-domiciled Brookfield unit is expected to close in the first half of 2024, subject to the standard set of approvals. The transaction is not subject to any financing conditions or contingencies. AEL will not seek better offers, but could change its stance on the current deal were an unsolicited superior offer to float in.

The deal and the smiling faces all around put paid to rising tensions between the two firms.

Strategic moves by Brookfield Reinsurance had made the AEL minority shareholder into a competitor and “increasingly and publicly hostile toward our strategy,” AEL management last lamented in its Q1 2023 report.

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