What happened
Shares of American Equity Investment Life Holding (NYSE: AEL) soared this week as the stock price rose 29.5% this week as of 10 a.m. ET on Friday, according to data provided by S&P Global Market Intelligence. American Equity is currently up about 15.5% year to date, trading at just under $53 per share.
The major markets were all up this week, too, as the S&P 500 climbed 2.1%, the Dow Jones Industrial Average rose 1.8%, and the Nasdaq Composite increased 2.1% as of Friday morning at 10 a.m. ET.
So what
American Equity, based in West Des Moines, Iowa, is a leading provider of life insurance and fixed-index annuities. The stock price skyrocketed this week on the news that Brookfield Reinsurance(NYSE: BNRE) had made an offer to buy it on Tuesday.
Brookfield Reinsurance, the largest shareholder of American Equity, with about a 19% stake, offered to buy all outstanding shares of American Equity for $55 per share. That breaks down to $38.85 per share in cash and $16.15 per share in Brookfield Asset Management(NYSE: BAM) stock. Brookfield Reinsurance plans to purchase from Brookfield (NYSE: BN) the shares of Brookfield Asset Management required to satisfy the noncash consideration. Brookfield's interest in Brookfield Asset Management will decrease from 75% to approximately 73% as a result.
The American Equity board confirmed receipt of the offer and said it would "carefully review" it, adding that there is "no guarantee that an agreement will be reached or on what terms."
It has been a bit of a bumpy ride in recent months for the two sides to get here. Last November, Brookfield Reinsurance CEO Sachin Shah, who sat on the American Equity board, resigned his post over what he called a change in the company's strategic direction and its AEL 2.0 strategy. The resignation followed AEL's purchase of an equity stake in 26North Partners, a private equity firm with a reinsurance arm.
But things seemed to have changed since then, as Shah wrote to American Equity board chair David Mulcahy this week that Brookfield Reinsurance "is proposing to acquire AEL due to AEL's successful transformation into an asset manager and an asset-light insurer under the AEL 2.0 strategy," according to an SEC filing.
Now what
In the letter to the board chair, Shah mentioned the "complementary nature of AEL's annuity business to BNRe's existing re/insurance platform." He also said that Brookfield Reinsurance is "committed to continuing AEL's leading position in the annuity market and strong operating platform."
The $55-per-share offer is better than the $45-per-share offer that AEL rejected last December from Prosperity Group and Elliott Investment Management. It also tops a $36-per-share offer from Mass Mutual in 2020, just before Brookfield Reinsurance took its stake.
In the letter to Mulcahy, Shah said that Brookfield Reinsurance is "prepared and intends to negotiate in good faith the terms of a definitive agreement in respect of the proposal such that the parties may announce a transaction on or prior to June 30, 2023." That's today, so there could be more news coming soon.
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Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Brookfield Asset Management, Brookfield Corporation, and Brookfield Reinsurance. The Motley Fool recommends Brookfield. The Motley Fool has a disclosure policy.
