Athene (ATH) Inks Deal to Acquire Donlen From Hertz Global

Athene Holding Ltd ATH has inked a stock and asset purchase agreement with Hertz Global Holdings, Inc. to buy its wholly-owned subsidiary, Donlen Corporation. The purchase consideration of $825 million is subject to adjustments for fleet equity, working capital and assumed debt. Hertz estimates these adjustments to result in a purchase price of at least $875 million.

Transaction Rationale

Headquartered in Bannockburn, IL, Donlen is a developer of innovative fleet management technology solutions. This transaction is in tandem with Athene’s objective of making attractive and differentiated long-term investments.

Hertz’s decision to divest Donlen amid financial restructuring follows the $1.65 billion debtor-in-possession financing and $4 billion fleet financing recently approved by the Bankruptcy Court. The divestment of Donlen will offer considerable additional flexibility to help it achieve its strategic and financial goals.

Athene, carrying a Zacks Rank #3 (Hold), offers various insurance and reinsurance retirement products across the United States and Bermuda. It remains committed to making an upfront investment of approximately $1 billion while intending to make an additional investment later on to cushion about $2 billion of additional growth in the fleet besides strengthening the balance sheet.

Inorganic Growth Story

Athene boasts impressive inorganic growth, which has been driven by several buyouts and block reinsurance transactions with several companies. Liberty Life Insurance Corporation, Investors Insurance Corporation, Presidential Life Corporation, and Aviva USA Delta Lloyd Deutschland AG (DLD) have helped Athene to improve product offerings and add to the scalability of its business as well.

Share Price

Shares of Athene have lost 1.8% year to date against the industry’s decline of 13.7%. Continued focus on organic and inorganic channels, strategic relationship with Apollo and effective capital deployment measures should help shares bounhce back.

Acquisitions in the Space

There have been a host of acquisitions in the insurance space of late, given the significant capital available. Recently, Kemper KMPR agreed to acquire American Access Casualty Company to strengthen the acquirer’s Specialty Auto segment. Arthur J. Gallagher & Co. AJG acquired AWIS Group, a wholesale insurance broker to boosts its risk placement services division. Brown & Brown BRO announced that its subsidiary bought CoverHound and its wholly owned subsidiary, CyberPolicy.

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