Brookfield Asset Management Voting Ord Shs Class A BXDIF

TD

[retiredcf]

This is a flash report so they may raise their current target of US$46.00. GLTA

Brookfield Asset Management Inc.

(BAM-N, BAM.A-T) US$33.74 | C$44.48

Announces Meaningful Investment in U.S. Insurance Market Event

• BAM announced a strategic partnership with American Equity Investment Life Holding Company (AEL-N, not rated), whereby BAM will become a 19.9% cornerstone investor in AEL, as well as a reinsurance counterparty.

• AEL is a leading issuer of fixed index annuities through independent agents, banks, and broker-dealers.

  Impact: POSITIVE

• We do not view the equity investment (~$680mm at $37.00/share) and reinsurance transaction (up to $10bln) as financially material to BAM; however, we see the partnership as strategically important. At its recent Investor Day, BAM expressed the view that insurance portfolios could become a $100bln-$200bln business for the company over time, and that, with zero/near-zero interest rates, and access to the Oaktree credit franchise, the timing was right.

• The equity investment will occur in two stages: 1) an initial purchase of a 9.9% interest at $37.00/share promptly following Hart-Scott-Rodino approval (15% premium to the last share-price) and 2) a second purchase of a 10.0% interest at the greater of $37.00/share or adjusted book value per share.

• The second purchase is subject to finalization of certain reinsurance agreement terms, receipt of applicable regulatory approvals, and other conditions, and is expected to close in H1/21.

• The reinsurance transaction involves a commitment to reinsure up to $10bln in annuity liabilities, including an initial $5bln of existing liabilities, and up to $5bln on additional future business when written.

• The deal, which has been under discussion for some time (since March), will provide AEL with access to BAM's higher-returning alternative asset strategies, and should position AEL to generate sustained returns in a zero/near-zero interest rate environment.

• BAM has agreed not to transfer any shares purchased in the equity investment for two years after the applicable closing of the investment, as well as to customary standstill restrictions until the five-year anniversary of the initial equity investment, in each case, subject to certain exceptions. BAM will receive one seat on AEL’s Board following the initial equity investment.

• Concurrent with its announcement of the strategic partnership with BAM, AEL rejected an unsolicited acquisition proposal from Athene Holding Ltd. and Massachusetts Mutual Life Insurance Co. at $36.00/share in cash.