Challenger Ltd (ASX: CGF) shares are having a very poor session.
In morning trade, the annuities company's shares are down 14% to $6.00.
Why are Challenger shares being hammered?
The catalyst for today's decline has been the release of an announcement this morning relating to a major partner and shareholder.
According to the release, Apollo Global Management (NYSE: APO) has reduced its shareholding in Challenger.
It notes that since July 2021, Apollo has increased its equity stake in Challenger to 20% and the two businesses have built a strategic partnership. This has been focused on delivering on a shared ambition to provide customers with financial security for a better retirement.
And while Challenger and Apollo remain committed to pursuing a range of initiatives as part of their ongoing commercial partnership, including an asset origination and distribution partnership, Apollo has decided to offload part of its holding.
This is because it will support the redeployment of capital to other growth opportunities.
The release reveals that Apollo has reduced its stake from 20.1% to 9.9% this morning through a block trade. This appears to have been undertaken at $6.51 per share.
Strategic initiatives to continue
The two parties revealed that their strategic initiatives will continue and are not subject to Apollo's shareholding in Challenger.
This includes Challenger Life having access to Apollo's high-quality direct asset origination capabilities. These help support both customer annuity rates and returns for Challenger shareholders.
In addition, Challenger will continue to exclusively distribute Apollo's Aligned Alternatives (AAA) strategy to Australian retail and wholesale clients. This is good news because they continue to gain strong interest according to management.
Commenting on the news, Challenger's managing director and CEO, Mr Nick Hamilton, said:
Challenger and Apollo have developed a collaborative partnership that supports our broader growth strategy. We look forward to continuing this relationship and pursuing a range of initiatives to deliver value for Challenger shareholders, including through asset origination and distribution of Apollo's high quality products in Australia. Apollo's re-evaluation of its investment in our business will also significantly increase Challenger's free float and improve trading liquidity.
This sentiment was echoed by Apollo Head of Asia-Pacific, Matthew Michelini. He adds:
We believe Challenger is a unique platform to offer the next generation of investment products to retirees in Australia. As one of our most important long-term strategic partners globally, we look forward to continuing to collaborate on asset management and product design.
