Benzinga | Mar 8, 2021 07:03AM EST

Apollo and Athene to Merge in All-Stock Transaction; Each Common Share of Athene Will Be Exchanged For A Fixed Ratio Of 1.149 Shares Of Apollo Common Stock

Apollo (NYSE:APO) and Athene (NYSE:ATH) have entered into a definitive agreement to merge in an all-stock transaction that implies a total equity value of approximately $11 billion for Athene. Under the terms of the transaction, each outstanding Class A common share of Athene will be exchanged for a fixed ratio of 1.149 shares of Apollo common stock. Upon closing of the merger, current Apollo shareholders will own approximately 76% of the combined company on a fully diluted basis, and Athene shareholders will own approximately 24%.

The merger of Apollo and Athene combines two growth companies providing products and services that are in high demand -- investment returns and retirement income. The stronger capital base and complete alignment will allow the company to rapidly scale asset and liability origination, broaden distribution channels and act as a leading global solutions provider. The company will operate in an environment powered by strong market and demographic trends.

Apollo Co-Founder and incoming CEO Marc Rowan said, "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."

Apollo Founder and Chairman Leon Black 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."

Apollo Co-Founder Josh Harris said, "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."

Athene Chairman and CEO Jim 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."

Transaction Highlights

* 100% stock-for-stock, intended to qualify as a tax-free transaction for U.S. federal income tax purposes

* Substantially accretive transaction, strengthening earnings power of the combined company to more than double Apollo's reported earnings in 2020

* Full alignment between Apollo and Athene, with all stockholders participating in the upside

* $1.60 annual dividend following closing with increase based on growth of the business

* Apollo proceeds with conversion to simplified structure, with single class of voting stock and equal voting rights for each share

* Creates $29bn pro forma market cap company (valued as of 3/5/21 close); company expected to be eligible for S&P 500 inclusion, with transparent, best-in-class governance

* Establishes permanency of Athene's AUM to Apollo and organic integration of Apollo's value-add services to Athene, enabling both businesses to thrive symbiotically

* Low execution risk between complementary businesses and management teams

* Positive for credit rating agencies and policyholders across both companies