Apollo taking enlarged stake in Athene, as ACRA sidecar hits $3bn

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Private equity and alternative investment specialist Apollo Global Management has taken an enlarged stake in Athene Holding Ltd., the life and retirement reinsurance firm that it already majority-owned, while investment commitments for its Athene Co-Invest Reinsurance Affiliate (ACRA) sidecar vehicle have risen to $3 billion.

Apollo Global Management logoApollo said that the reason for the investment and taking an even larger stake in Athene, is to ensure that the alignment of interest between the asset manager and its life and retirement reinsurance entity is as strong as it can be.

The arrangement features a share exchange between Apollo and Athene, as well as the purchase by Apollo of Athene shares, and it also gets rid of Athene’s current multi-class share structure.

The companies believe this will significantly improve Athene’s index inclusion eligibility and expand Athene’s investor base, by providing strengthened alignment between the pair which can only be a good thing for growing investor interest and confidence.

Jim Belardi, Chairman and Chief Executive Officer of Athene, commented, “Today’s announcement reflects the strength and strategic nature of our longstanding relationship with Apollo. After carefully reviewing Athene’s options to unlock value for shareholders, Athene and Apollo determined it is prudent to eliminate Athene’s multi-class share structure and make other enhancements to the companies’ mutually beneficial relationship. 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. We believe the combination of these factors will greatly enhance Athene’s appeal to a much broader group of active and passive investors.”

Leon Black, Chairman and Chief Executive Officer of Apollo, added, “We are tremendously excited to be announcing this strategic transaction, which we believe will meaningfully enhance value for both Apollo and Athene shareholders. Athene and Apollo have developed a special and symbiotic relationship since Athene’s inception a decade ago. 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.”

The deal will strengthen Athene’s fire power for doing large life and retirement focused reinsurance deals, adding roughly $1.6 billion of capital, including approximately $1 billion of incremental excess capital.

It increases the economic alignment greatly, but reduces the voting power of Apollo in Athene, which investors will appreciate.

Apollo, its related parties and employees are expected to control equity interests representing around 35% of the voting power and economic interests of Athene after the deal, as compared to 45% voting power and around 17% economic interest they hold today.

Apollo has also announced continued strong third-party capital fundraising progress for its Athene Co-Invest Reinsurance Affiliate (ACRA) vehicle this year.

The structure, which will operate as a kind of investment fund, will enable investors to participate alongside the insurer in private deals, thus providing sidecar like capacity to support the kind of large reinsurance transactions that Athene tends to enter into.

Apollo now says that it and Athene have raised $3 billion of capital commitments to date for the strategic capital vehicle.

Through July Apollo had reported that unfunded capital commitments for ACRA neared $1.5 billion, suggesting strong additional interest through the rest of Q3 and now the company is getting closer to its target for the ACRA sidecar-like vehicle.

With today’s announcement of increased alignment between the pair demonstrating just how important Athene’s reinsurance strategy has become for Apollo, the growing ACRA investment pot also reflects growing third-party investor interest in these strategies and in insurance-linked returns in general.

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