Brookfield Reinsurance to Acquire AEL in $4.3 Billion Transaction

Brookfield Reinsurance and American Equity Investment Life Holding Company announced that they have entered into a definitive agreement whereby Brookfield Reinsurance will acquire all of the outstanding shares of common stock of AEL it does not already own in a cash and stock transaction that values AEL at approximately $4.3 billion.

As part of the agreement, each AEL shareholder will receive $55.00 per AEL share, consisting of $38.85 in cash and 0.49707 of a Brookfield Asset Management Ltd. (NYSE, TSX: BAM) (“BAM”) class A limited voting share (“BAM Shares”) having a value equal to $16.15 (based on the undisturbed 90-day volume-weighted average share price (“VWAP”) of the BAM Shares on June 23, 2023), subject to adjustment in certain circumstances as described below (the “Merger Consideration”). The Merger Consideration of $55.00 per share represents a 35% premium to AEL’s undisturbed closing share price on June 23, 2023 and a 42% premium to AEL’s 90-day VWAP as of such date.

Anant Bhalla, President and Chief Executive Officer of AEL, said, “We are pleased to have reached this agreement with Brookfield Reinsurance and believe this transaction provides an excellent outcome for all AEL shareholders, policyholders and other stakeholders. The significant premium that will be delivered to shareholders as a result of this transaction is a testament to our strong performance and AEL’s successful transformation under the AEL 2.0 strategy into an asset light insurer and asset manager. The transaction represents an opportunity for AEL shareholders, through the BAM Shares, to remain invested in a market leading global alternative asset manager. I couldn’t be more excited about the potential opportunities for our people and benefits for policyholders as part of a preeminent global financial institution.”

David Mulcahy, Non-Executive Chairman of AEL’s board, said, “On behalf of the entire board, I am incredibly proud of AEL’s achievements and record of value creation for all stakeholders under the AEL 2.0 model. Thanks to Anant, the entire management team and our dedicated employees across our platform for their role and contributions in achieving this great outcome with Brookfield Reinsurance.”

Sachin Shah, Chief Executive Officer of Brookfield Reinsurance, said, “This transaction represents an important step in the continued growth of our insurance business, further diversifying, and scaling, our insurance capabilities, and is a direct result of the partnership we have developed with AEL since our initial investment in 2020. With this transaction we have now deployed or committed over $10 billion of capital since our inception, bringing our total insurance assets to over $100 billion, and we remain on track with our growth targets for the business. Brookfield Reinsurance remains well capitalized and committed to meeting the needs of its policyholders and clients.”

Jon Bayer, Managing Partner, Brookfield Reinsurance, said, “Given the complementary nature of AEL’s leading fixed annuity business to our existing platform, we expect to accelerate growth in collaboration with our distribution partners and employees while continuing to meet the needs of our policyholders and other stakeholders. Under its current leadership, AEL has been transformed into an innovative, asset light insurer that is positioned for growth, and we look forward to building on our successful partnership.”

Following closing, Brookfield Reinsurance expects to maintain AEL’s headquarters in Des Moines, Iowa and that growth in the AEL platform over time should increase net jobs in Iowa. Brookfield Reinsurance also looks forward to supporting the greater Des Moines area, including through maintaining AEL’s existing charitable contributions and through Brookfield’s broader charitable foundation and other charitable initiatives.

Brookfield Reinsurance also intends to continue AEL’s focus on alternative asset strategies and expects BAM will manage a significant portion of AEL’s assets. As a result, AEL will gain access to BAM’s leading direct origination platforms and asset management capabilities while maintaining its current high-quality bias and investment grade focus.

Additional Transaction Details

If based on the 10-day VWAP of the BAM Shares (measured five business days prior to closing of the transaction) (the “BAM Final Stock Price”), the BAM Shares are trading at a price such that the aggregate consideration per AEL share would be less than $54.00 per share, the number of BAM Shares delivered for each AEL Share will be increased such that the value of the aggregate consideration delivered for each AEL Share will equal $54.00 and Brookfield Reinsurance will have the option to pay cash in lieu of some or all of the share portion of the Merger Consideration. In the event that the BAM Final Stock Price would result in the aggregate Merger Consideration per AEL Share being greater than $56.50, the number of BAM Shares delivered for each AEL Share will be decreased such that the value of the aggregate consideration delivered for each AEL Share will equal $56.50.

Brookfield Reinsurance intends to acquire from Brookfield Corporation (NYSE, TSX: BN) (“BN”) the BAM Shares required to satisfy the non-cash consideration offered to AEL shareholders. Subject to this occurring, BAM’s public float will increase by approximately 10%, which is strategically important as BAM continues to broaden its shareholder base and BN’s interest in BAM will decrease from 75% to approximately 73%. Accordingly, there will be no net new issuance of shares of BAM, BN or Brookfield Reinsurance and no dilution to BAM, BN or Brookfield Reinsurance shareholders as a result of this transaction. The cash portion will be funded from excess liquidity within Brookfield Reinsurance.

The transaction is not subject to any financing condition or contingency. Each of Brookfield Reinsurance’s and AEL’s boards of directors unanimously approved the merger agreement.

The merger is expected to close in the first half of 2024, subject to approval by AEL shareholders and other closing conditions customary for a transaction of this type, including receipt of insurance regulatory approvals in relevant jurisdictions and the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

Upon the closing of the proposed transaction, AEL Shares will be delisted from the New York Stock Exchange and shares of AEL’s series A noncumulative preferred stock (NYSE:AELPRA) and series B preferred stock (NYSE:AELPRB) will remain listed on the New York Stock Exchange.

Under the terms of the merger agreement, AEL has agreed to suspend the payment of dividends on its common stock through the closing of the transaction, unless the transaction does not close by April 4, 2024, in which case the AEL Board may decide to reinstate the payment of dividends on its common stock.

For further information regarding the definitive merger agreement, please see AEL’s current report on Form 8-K, which will be filed with the U.S. Securities and Exchange Commission (the “SEC”) and will contain a summary of the material terms and conditions of the merger agreement, as well as a copy of the merger agreement.

Advisors

Barclays is serving as lead financial advisor to Brookfield Reinsurance and BMO Capital Markets is also acting as an advisor to Brookfield Reinsurance on this transaction. Cravath, Swaine & Moore LLP is serving as legal advisor to Brookfield Reinsurance and Debevoise & Plimpton LLP is serving as Brookfield Reinsurance’s insurance counsel.

Ardea Partners and J.P. Morgan are serving as financial advisors and Sullivan & Cromwell LLP is acting as legal advisor to AEL on this transaction.

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