[Asia Economy Reporter Byunghee Park] Alternative investment management firm Apollo Global Management is merging its insurance subsidiary, Athene Holding.
According to major foreign media on the 8th (local time), Apollo will merge Athene to become a large financial company with a market capitalization approaching $30 billion.
On Wall Street, there is analysis that Apollo decided to merge Athene to quell controversy over allegations that Apollo was extracting excessive fees from Athene.
Apollo established Athene in 2009. At that time, many assets were being sold at low prices due to the global financial crisis. Apollo founded the insurance company Athene with the purpose of raising funds to invest in discounted corporate bonds and credit assets. The goal was to attract customers through the insurer, invest the secured premiums, and increase fee income.
Athene quickly grew to become one of Apollo’s major clients and generated substantial fee income for Apollo.
However, in 2019, Athene shareholders filed two lawsuits against Apollo. The Athene shareholders claimed that Apollo used its strong influence over Athene to charge excessive fees. Apollo earned over $400 million in fee income from Athene in 2018 alone. Athene shareholders accused Apollo of exploiting Athene.
The lawsuit filed by Athene in New York reached a deadlock. The Bermuda court argued that since Athene’s headquarters is registered in Bermuda, the lawsuit should proceed in Bermuda.
As the lawsuit stalled, Apollo sought to appease Athene shareholders. In October 2019, Apollo announced it would reduce its voting rights ratio to decrease its influence over Athene and pay Athene $1.6 billion in a combination of stock and cash. At that time, Apollo held a 17% equity stake in Athene but exercised 45% of the voting rights. Apollo stated it would increase its equity stake to 35% and exercise voting rights proportionate to its stake.
Analysis suggests that Apollo’s current merger with Athene is a further step. Through the merger, Apollo aims to completely eliminate any grounds for controversy.
Under this merger, Athene shareholders will receive 1.149 shares of Apollo stock for each share of Athene stock. Both Apollo and Athene are publicly traded companies, and as of the 8th, Athene’s market capitalization was $9.93 billion, while Apollo’s was $21.08 billion. On that day, Athene’s stock price rose 5.97%, whereas Apollo’s stock price fell 4.24%.
Apollo’s CEO, Leon Black, stated that this merger is intended to correct issues, enhance growth potential, and reconsider shareholder value.
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