It only took a few weeks for Marc Rowan to put his stamp on Apollo Global Management Inc.
Rowan, the private equity firm’s co-founder and incoming chief executive officer, was the force behind an $11 billion deal that will remake the business: Monday’s announcement of a full acquisition of Athene Holding Ltd. In one move, he not only reshaped Apollo, but also showed the world that the firm is moving past the 30-year reign of Leon Black.
The Athene acquisition completes a process that Rowan – who succeeds Black as CEO no later than July – started in 2009, when he created the annuity business so that it would send vast sums of cash to Apollo for investments. Full ownership brings the model closer to Warren Buffett’s approach at Berkshire Hathaway Inc. that inspired the initial move. It also puts Rowan’s vision – not Black’s – at the center of Apollo’s future strategy.
The all-stock deal is expected to be completed in January 2022, the companies said in a statement. Apollo was already the annuity seller’s biggest shareholder, with the firm and related entities owning a 35% stake.
It’s a move that combines two businesses providing products and services in high demand – investment returns and retirement income, the firms said in the statement. The deal will “substantially” add to profit, more than doubling Apollo’s reported earnings last year, they said.
Apollo built Athene into one of the top fixed-annuity providers in the U.S. In 2016, the insurance firm raised just over $1 billion in an initial public offering. Athene has become an essential fixture in Apollo’s financial apparatus, and private equity rivals have since sought to build up their own insurance businesses.
“This transaction is strategic,” Rowan, 58, said in a conference call that didn’t include Black. “It is accretive unlike any other transaction I have seen and gives us a lot of benefits at very, very low execution risk, given how much time we spent together and how well we know each other.”
The surprise announcement came weeks after Apollo unveiled a major overhaul, with Black relinquishing his CEO post amid fallout over his business ties with sex offender Jeffrey Epstein. Black, 69, will remain chairman.
As part of the changes, the firm also said it would have more independent directors and convert to a new stock structure with just one class of voting rights.
Shares of Apollo dropped 3.2% to $47.96 at 10:38 a.m. in New York.
“The companies together will be able to do more than they will be able to do individually,” JMP Securities analyst Devin Ryan said in a phone interview. “This removes any questions around the relationship.”
Athene was perhaps Rowan’s greatest triumph for Apollo. Taking a page from Buffett’s play book at Berkshire Hathaway, he devised the insurance company to throw off vast sums that Apollo could then use for investments. Athene is one reason that Apollo today is the envy of the private equity business.
Deeper Ties
Under the terms of the deal, each Athene common share will be exchanged for 1.149 shares of Apollo common stock, with Apollo shareholders owning about 76% of the combined company once the transaction is completed.
In 2019, the two deepened their ties with further investments in each other. The insurer allows the private equity firm to collect money from annuity holders – what’s known as “permanent capital” – and invest the assets in the credit funds, distressed debt and buyouts for which Apollo is better known.
Athene, which generated record growth last year, will be “a financial juggernaut” when combined with Apollo, CEO Jim Belardi said in Monday’s conference call. “We are confident the path forward offered by this transaction is the natural, appropriate and logical next step.”
The combined company will be led by Rowan, while Athene will continue to be led by Belardi and his current management team. Four Athene directors will join the combined company’s board, including Belardi.
Apollo also said Monday it plans to convert to a full C-corp, with a one-share, one-vote structure by January, and that the deal will allow the stock to be eligible for inclusion in more market indexes, including the S&P 500.
The firm has taken other steps to shore up its corporate governance,
