Challenger (ASX:CGF) share price jumps 14% on Athene/Apollo news

This annuities company is surging higher on Wednesday…

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The Challenger Ltd (ASX: CGF) share price has been a very strong performer on Wednesday.

In early trade, the annuities company’s shares are up 14% to $6.22.

Why is the Challenger share price racing higher?

Investors have been fighting to get hold of Challenger shares on Wednesday after it revealed a major new shareholder.

According to the release, leading US-based retirement services company Athene, together with its strategic partner Apollo Global Management, has agreed to acquire a 15% minority interest in Challenger from Caledonia (Private) Investments.

When combined with other Challenger shares acquired by Athene and Apollo, the acquisition of the 15% equity interest will result in a total expected minority economic interest of 18% for approximately A$720 million (or US$540 million).

A separate announcement shows that Athene paid $6.00 per share, which represents a premium of 9.7% to Challenger’s last close price.

Why is Athene investing in Challenger?

The release explains that Athene and Apollo, which are in the process of merging, see attractive long-term opportunities in partnering with and supporting Challenger’s continued growth as minority shareholders.

Athene notes that both it and Challenger share the same mission – to provide customers with financial security for retirement.

Athene’s CEO, Jim Belardi, commented: “Investing in Challenger represents an exciting opportunity for us to support a well-established platform within the Australian market, a geography we have been studying given the current economic conditions and compelling demographic fundamentals.”

“In many ways, Challenger is the perfect partner for us – the company is led by an experienced management team, has a strong market position, attractive growth prospects, and shares our deep commitment to retirees. Together, we believe we can help Challenger continue to build long-term value, similar to what we’ve been able to achieve in building Athene’s business in the U.S. and supporting the growth of our sister company Athora in Europe, where we are also minority shareholders,” he added.

Challenger’s Managing Director and Chief Executive Officer, Richard Howes, welcomed the investment.

He said: “Today’s announcement by Athene is a strong endorsement of Challenger’s market position and long-term growth prospects from a leading international retirement services provider. We look forward to working with Athene and Apollo as we continue to pursue our shared purpose of providing customers financial security for a better retirement.”

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Challenger Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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