Private equity fund Apollo Global Management is likely to have a major influence over the replacement of Challenger’s outgoing boss Richard Howes and may put pressure on the company to offload its lucrative funds management business Fidante, according to sources.
While delivering a $592.3m annual net profit on Tuesday, Challenger announced its chief executive Richard Howes would leave the company after almost three years in the job.
Despite profit downgrades under his watch, Mr Howes is understood to have had strong support from Challenger’s board, led by the chairman of 17 years Peter Polson, who is said to have fended off suggestions by shareholders that fresh blood and a change of direction was needed.
But now that the Apollo-controlled Athene holds 15 per cent of Challenger – soon to increase to 18 per cent once it receives a sign-off from the Australian Prudential Regulation Authority – some believe that its funds management business Fidante may soon be on offer.
While the line from Apollo is that it is not interested in a buyout of Challenger for now, market experts believe that will change.
Funds management is not the core business of retirement services group Athene, and already suitors have been circling Fidante.
However, it is understood that Apollo will make up its mind on whether Challenger should retain the business after assessing its options, and there could be some parts of funds management that it finds attractive.
The funds management unit has been a strong performer for Challenger, with Fidante’s funds under management growing 19 per cent during the 2021 financial year and the funds under management growing 30 per cent to $106bn overall for the year to June.
Annuities also did well, with sales increasing 46 per cent to $4.6bn.
Challenger now has a banking licence approved after last year buying MyLifeMyFinance.
Sources say Apollo is likely to have a big influence over who replaces Mr Howes, who finishes up in March, but it is understood that the private equity firm has not asked for a board seat.
Challenger shares closed up 10.9c to $5.89.
Analysts think a takeover by Athene is more likely than one by major Japanese shareholder MS & AD Insurance.
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