Apollo’s Challenger selldown no surprise for market observers

Challenger is an investment management company helping people in retirement.

To those in the know, Apollo Global Management’s selldown in Challenger came as no major surprise last week.

There had been some chatter that frustration had been building about the investment.

First, it was never thought to be Apollo’s desire to buy into the $4bn-plus Australian listed annuities provider and investor in the first place.

At the time, Apollo was buying retirement services provider Athene, which offers annuities globally, and Athene was negotiating to buy a $720m-plus stake in the Challenger business at $6 a share, not Apollo itself.

The Challenger interest was inherited by Apollo at the finalisation of the Athene transaction in 2021.

The other factor was conflicts when it came to debt transactions – determining whether they were carried out through Apollo, Challenger or Athene.

And then there’s the Australian annuities market, which is not as lively and large as others globally, and may not have been to Apollo’s liking.

Challenger had a securitisation relationship with Pepper Money, and there is speculation now as to whether Apollo buys Pepper.

It’s looked at it before, but any transaction would probably be negotiated first through Pepper Money’s major shareholder Kohlberg Kravis Roberts.

Challenger announced last week that Apollo had reduced its shareholding from 20.1 per cent to 9.9 per cent, making Japan’s MS&AD once again its largest shareholder with about 15 per cent.

Shares were sold at $6.51 in a block trade executed by Goldman Sachs and Jarden.

In the last two trading days after the selldown, the stock fell to $6.23 from $7, down 11 per cent.

Macquarie analysts said Challenger’s capital position remained strong.