Apollo becomes a mini-Berkshire … without Buffett
The purchase of Athene clarifies its relationship with the insurance company, but obscures the value of the rest of its assets
Marc Rowan may regret imitating Warren Buffett. Apollo Global Management’s new CEO announced Monday that the private equity group was buying the two-thirds of the insurer Athene that it did not yet own. It makes sense to have a permanent capital vehicle in-house, as the Sage of Omaha knows. But Apollo runs the risk of being valued as a heavy heavy financial conglomerate, rather than an energetic buying fund.
The deal simplifies an uneasy relationship between Athene and Rowan’s $ 21 billion group, which created the insurer in 2009. Apollo receives payments for investing Athene’s asset base. That gives Apollo an incentive to push Athene to use the excess capital for investment rather than for share buybacks. It also makes Apollo overly dependent on an outside company. Approximately 40% of its assets under management come from Athene.
After the agreement, all in shares, they will be on the same team. Apollo shareholders will own roughly three-quarters of the expanded $ 30 billion company, with Athene shareholders having the rest. In addition, Rowan stays with the company at a low price. His offering values Athene at nearly $ 11 billion, or 7.1 times 2021 earnings according to Refinitiv’s median estimate. Other life insurance companies trade at 8.8 times on average.
The problem is that the in-house incorporation of Athene clouds Apollo’s investment case. As a result of the deal, Rowan will have to consolidate earnings from the annuity provider. Based on 2020 figures, they could account for more than half of the combined total. The new group will look more like one of those other life insurance companies than a focused buyout fund, and Apollo is trading at 18 times future earnings. The risk of a conglomerate discount may explain the 5% decline in Apollo’s share price following the announcement of the deal on Monday.
Buffett, whose Berkshire Hathaway owns insurance company Geico, is a difficult example for anyone to emulate. Though Rowan helped shape Apollo, he was just given the authority to take over after Chief Leon Black resigned when the company unveiled an investigation into his relationship with convicted sex offender Jeffrey Epstein.
Buying Athene can help Apollo shift gears and move on to the next chapter. But it will also dull the company’s valuation. For Rowan, clarifying the relationship with Athene has a price.
SoftBank agreed on Tuesday to pay more than 10,000 million dollars to acquire WeWork, doubling its investment and paying close Read more
Microsoft has struck the table when it won the JEDI contract (acronym for Joint Enterprise Defense Infrastructure) tendered by the Read more
Siemens Gamesa has received a conditional order to supply 140 wind turbines of its most powerful model (11 MW) to Read more
A few years ago Boeing was the most important aeronautical company on the planet. being the most important civil constructor Read more
Tesla will begin delivering the first orders of the Model Y, its new SUV compact SUV, in the first quarter Read more
General Motors has announced that it will invest 1,500 million dollars (1,350 million euros) in the new generation of ‘pick-ups’ Read more
Netflix already has 158.3 million subscribers worldwide, demonstrating its strength in the face of increasing competition. However, its biggest advantage Read more
The aircraft manufacturer Boeing (NYSE: BA) suspends the production of its 737 MAX aircraft, after not obtaining this year, as Read more
Navin Shenoy, the vice president of Intel, said in a statement that “this acquisition advances our artificial intelligence strategy, which Read more
The Starliner spacecraft, from the Boeing company, landed successfully this Sunday in New Mexico after it failed on Friday in Read more