BAM - American Equity takeout price in the low $50s is warranted - analyst

2023-06-27 08:54:03 ET

An American Equity Investment Life ( NYSE: AEL ) takeover price in the low $50s per share is likely warranted, an RBC analyst wrote before Brookfield Reinsurance ( NYSE: BNRE ) confirmed it made a cash and stock bid for AEL valued at $55 per share.

In the low $50s, it would constitute a deal price somewhere around 0.8x book value (ex AOCI), according to RBC analyst Scott Heleniak, who has an outperform rating and a $50 price target on AEL.

"Given the relationship with Brookfield over the years (and its large stake in AEL), we think that AEL could consider a sale of the company to Brookfield at a fair price," Heleniak wrote in a note on Monday.

AEL shares jumped 17% to $52.61 in premarket trading. Brookfield Reinsurance ( BNRE ) fell 2.6%.

The latest takeover offer for AEL comes after Prosperity Group Holdings, which was backed by hedge fund Elliott Investment Management, withdrew its proposal to acquire AEL for $45.00 per share in February after AEL rebuffed the offer in December.

The Prosperity bid came after AEL rejected a joint $3 billion bid from Athene and MassMutual in October 2020. Instead of accepting the offer, AEL agreed to a strategic partnership with Brookfield Asset Management ( BAM ), which now has a 20% stake in the company.

Any acquisition of AEL is unlikely to raise antitrust concerns given AEL's "modest" market share, Truist analyst Mark Hughes, who has a buy rating and a $49 price target on AEL, wrote in a note on Monday.

"Annuity players like AEL are a natural fit for larger asset managers that are able to generate synergies in asset accumulation and portfolio management, while the companies are very familiar with each other’s operations and senior leadership teams," Hughes wrote.

More on American Equity:

• The Rise of Annuities: How American Equity Is Capitalizing
• American Equity enters into accelerated $200M buyback agreement
• American Equity Investment stock dives after Prosperity withdraws takeover proposal

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