North America IPO: Athene’s US$1.2bn IPO

IFR Review of the Year 2017
3 min read
Anthony Hughes

Heroic endeavour

Complexity and the insurance sector go hand-in-hand. The US$1.2bn IPO in early December 2016 of Apollo Global Management-backed annuities/retirement services provider Athene was no exception, but the company and its underwriters were able to navigate complications that went beyond mere actuarial matters.

One complication was timing. Athene pushed ahead amid the policy uncertainty that followed the surprise election a month earlier of Donald Trump as president of the United States.

Athene CEO Jim Belardi, a former president of SunAmerica Life, said Athene did not need to raise money (it continues to have excess capital) but it had always envisaged going public to accelerate its growth.

“We were very confident in our ability to operate the company to public company standards because we had been doing that for quite some time,” Belardi told IFR.

Athene and Apollo, with the aid of key adviser Goldman Sachs, undertook a solicitation effort to reach hundreds of pre-IPO shareholders to gauge their interest in selling. This included both indirect owners (including the proverbial “Belgian dentists”) via an Apollo-managed, Euronext-traded permanent capital vehicle called AAA that owned 46% of Athene, and direct owners such the Apollo limited partners that co-invested alongside the private equity firm when it first joined forces with Belardi and his team of insurance specialists in 2009.

Athene and Apollo also had to craft a strategy to manage the orderly release post-IPO of stock held by the disparate group of shareholders that were not selling. They opted for four separate lock-up periods that would expire over a longer-than-normal two years, minimising the risk of the estimated 150m-share overhang (stock worth US$6bn at the IPO price) weighing on the stock.

The eight-day IPO roadshow included 57 one-on-ones and meetings with more than 250 investors. The deal was more than seven times oversubscribed, allowing for an upsize and helping to produce a 10.1% opening day gain. This enabled stabilisation agent Goldman – Barclays, Citigroup and Wells Fargo were the other top-line bookrunners – to fully exercise the overallotment option.

Athene then took aggressive steps to address the overhang once it was public. It priced two follow-ons within six months of the IPO: a US$1.5bn secondary offering in late March and a US$913m deal in early June. Those two deals were unprecedented in their pace so quickly after a large IPO.

Perhaps the most vexing challenge was convincing investors that Athene’s relationship with Apollo was a symbiotic one rather than laden with conflicts of interest. Apollo, which has carved out a reputation as one of Wall Street’s most ruthless players, is not just a major shareholder in Athene; it also manages all of the company’s assets in return for management fees. Apollo committed not to sell its stake, highlighting how important it saw Athene to its future.

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