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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 27,
2022
Apollo Asset Management, Inc.
(Exact name of registrant as specified in its charter)
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Delaware |
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001-35107 |
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20-8880053 |
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(State or other jurisdiction of incorporation) |
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(Commission File Number) |
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(IRS Employer Identification No.) |
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9
West 57th Street, 43rd Floor
New York, New York 10019
(Address of principal executive offices) (Zip Code)
(212) 515-3200
(Registrant's telephone number, including area code)
N/A
(Former Name or Former Address, if Changed Since Last
Report)
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant
under any of the following provisions (see General Instruction A.2.
below):
☐ Written communications pursuant to Rule 425 under the
Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the
Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b)
under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c)
under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the
Act:
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Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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6.375% Series A Preferred Stock |
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AAM.PR A |
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New York Stock Exchange |
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6.375% Series B Preferred Stock |
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AAM.PR B |
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New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth
company as defined in Rule 405 of the Securities Act of 1933 (17
CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934
(17 CFR §240.12b-2).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended
transition
period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Item 2.02
Results
of Operations and Financial Condition.
The information that pertains to the fiscal quarter and fiscal year
ended December 31, 2021 set forth below in Item 7.01 is
incorporated by reference herein.
Item 7.01
Regulation
FD Disclosure.
Update on Merger-Related and Other Financial Items
As previously announced, Apollo Global Management, Inc.
(“Apollo”)
plans to release financial results for the fourth quarter and full
year 2021 on February 11, 2022.
Ahead of that date and following the Investor Day held on October
19, 2021 (“Investor Day”) and the completion of the merger with
Athene Holding Ltd. (“Athene”) on January 1, 2022, as well as other
recent updates, we are providing select financial updates based on
information available as of January 26, 2022.
As a high-growth, global alternative asset manager, Apollo
presented its five-year growth strategy (the “plan”) at Investor
Day. Embedded within the plan are three key goals: scaling Apollo's
origination capabilities, building out global wealth distribution,
and growing Apollo's capital solutions business. Recent progress
with each of these goals is consistent with progress against
Apollo's financial targets. Apollo provided business and financial
performance targets it seeks to achieve by the end of 2026 and per
share Fee Related Earnings (“FRE”) and Spread Related Earnings
(“SRE”) estimates for 2022. Apollo remains comfortable with these
targets in view of its progress to date with the plan.
Apollo has recently made several announcements regarding
transformative forward progress, including the completion of the
Athene merger, the pending acquisition of the US wealth
distribution and asset management businesses of Griffin Capital
(“Griffin”), the compensation reset to better align employees with
shareholders, and a share repurchase program. Additionally, with
the share class restructure completed alongside the Athene merger
close, Apollo believes it has fully met all criteria for inclusion
in the S&P 500 index. Apollo also announced the recasting of
its non-GAAP financial results and performance measures to reflect
new operating segments, categorization of investment strategies,
and certain segment allocations commencing with the first quarter
of 2022.
This report notes the financial impact of certain items relevant to
the fourth quarter and/or full year 2021, the impacts of which we
believe are largely transitory on GAAP and/or non-GAAP
measures.
Athene Merger
On January 1, 2022, we closed the merger with Athene in an
all-stock transaction. We believe the combination will accelerate
growth through fully aligning both companies’ respective strategies
and employee incentives, while strengthening our combined
capabilities as a capital solutions provider.
As previously announced, Apollo will report standalone financial
results on February 11, 2022. We expect the Apollo Asset
Management, Inc. Form 10-K will be filed on or around February 25,
2022.
While the common shares of Athene have been de-listed following the
closing of the merger, Athene’s preferred shares remain listed, and
the company will continue to report standalone financial results
for the year ended December 31, 2021. Athene will issue an earnings
release on February 11, 2022 and expects to file its Form 10-K on
or around February 25, 2022 and will also file quarterly financial
reports with the SEC thereafter.
Compensation Reset
On December 2, 2021, we announced plans to reset our compensation
programs to create better alignment between shareholders and
employees and incentives to achieve the business and financial
performance targets presented at Investor Day. We want to attract
the most qualified and energized talent in the industry and want
motivated, productive talent to spend the entirety of their career
at Apollo. These changes, which include the one-time issuance of
additional vested equity awards, are expected to lower our fee
related compensation expense ratio from approximately 30% to 25%
over the next five years.
As previously announced, we consequently expect to incur a
one-time, non-cash GAAP charge of approximately $950 million in the
fourth quarter of 2021 largely related to the issuance of vested
equity awards. This vesting paradigm is a purposeful step in
empowering our employees. We want highly energized and productive
employees who want to be at Apollo, rather than people who are
incentivized to stay at Apollo because they need to vest. The share
count impact is described below.
The compensation reset will lower Apollo's Distributable Earnings
(“DE”) tax rate for fiscal year 2021 to be approximately 8%, and
Apollo expects its DE effective tax rate for full year 2022 to be
approximately 18%.
Griffin Acquisition
On December 2, 2021, a definitive agreement to acquire Griffin’s US
wealth distribution and asset management businesses in an all-stock
transaction was announced. The acquisition is a significant step in
building Apollo’s Global Wealth Management Solutions business,
which is focused on the development and distribution of
alternatives to individual investors and their wealth advisors. We
believe this acquisition will expand our retail investor presence,
accelerate our global wealth build, and will be strategically
accretive. More specifically, Griffin will expand our presence in
the independent broker dealer and wirehouse distribution channels
and includes two retail interval funds totaling approximately $5
billion of assets under management. We expect Griffin to generate
higher fee related revenues and costs and to become a meaningful
driver of earnings growth from Apollo’s Global Wealth Management
Solutions business in the years ahead.
The Griffin transaction is expected to close in two phases. We
expect to complete the acquisition of the US wealth distribution in
the first quarter of 2022, followed by the anticipated close of the
acquisition of the investment advisers to the two retail interval
funds in the second quarter of 2022. The Griffin acquisition is
subject to customary closing conditions, including approval by
stockholders of Griffin Institutional Access Real Estate Fund and
the Griffin Institutional Access Credit Fund.
The Griffin transaction is expected to be approximately breakeven
to Apollo’s after-tax DE per share in 2022.
Shares Outstanding
As of December 31, 2021, Apollo had approximately 249 million
shares of common stock issued and outstanding. As of December 31,
2021, DE shares outstanding were approximately 461 million shares,
which includes vested and unvested equity awards issued in
conjunction with the compensation reset and 1.7 million of newly
issued shares committed to establishing a non-profit
foundation.
As of January 6, 2022, Apollo had approximately 571 million shares
of common stock issued and outstanding. DE shares outstanding is
currently approximately 600 million shares. Pro forma for the
expected closing of the Griffin transaction in the second quarter
of 2022, DE shares outstanding is approximately 604 million
shares.
DE shares outstanding consist of total shares of common stock
outstanding, Apollo Operating Group Units that participate in
dividends and restricted share units (“RSUs”) that participate in
dividends. See “Non-GAAP Disclosures and Reconciliation” below for
the share reconciliation.
Athora Revised Fee Agreement
On December 15, 2021, we executed an amended and restated fee
agreement with Athora Holding, Ltd. (“Athora”), a company that
acquires or reinsures blocks of insurance business in the European
retirement services market. The new fee agreement revises the base
fee that we charge for managing certain assets on behalf of Athora
and removes Athora’s previous reimbursement of certain costs
incurred by Apollo. The effective date for these changes is January
1, 2021.
For our GAAP and non-GAAP financial results for 2021, the impact of
these fee agreement changes will be accounted for as an increase in
revenue and expenses. The annual increase in revenue and expenses
is approximately $25 million. The fee agreement changes were
reflected in the recent presentation updating non-GAAP financial
measures and will also be reflected in our financial results to be
issued on February 11, 2022.
Fee Related Earnings Margin
Pro forma for the segment allocations and the revised fee agreement
with Athora described above, Apollo's full year 2021 FRE margin is
expected to be approximately 57%. However, pro forma for the
acquisition of Griffin, Apollo expects this margin to be
approximately 100 basis points lower, as Griffin operates at a
lower profit margin than Apollo’s Asset Management segment. FRE
margin is calculated as FRE divided by fee related revenues (which
includes management fees, transaction and advisory fees and certain
performance fees).
The information included in this Current Report on Form 8-K is
being furnished and shall not be deemed to be “filed” for the
purposes of Section 18 of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), or otherwise subject to the
liabilities of that Section, nor shall it be incorporated by
reference into a filing under the Securities Act of 1933, as
amended, or the Exchange Act, except as shall be expressly set
forth by specific reference in such a filing.
* * *
In this Current Report on Form 8-K, references to “Apollo” refer
collectively to Apollo Global Management, Inc. and its
subsidiaries, unless the context otherwise indicates. The
information in this Current Report on Form 8-K contains
forward-looking statements that are within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of
the Exchange Act. These statements include, but are not limited to,
discussions related to Apollo’s expectations regarding the
performance of its business, its liquidity and capital resources
and the other non-historical statements in the discussion and
analysis and expectations regarding benefits anticipated to be
derived from the merger with Athene. These forward-looking
statements are based on management’s beliefs, as well as
assumptions made by, and information currently available to,
management. When used in this Current Report on Form 8-K, the words
“believe,” “anticipate,” “estimate,” “expect,” “intend”, “may,”
“will,” “could,” “should,” “might,” “target,” “plan,” “seek,”
“continue” and similar expressions are intended to identify
forward-looking statements. Although management believes that the
expectations reflected in these forward-looking statements are
reasonable, it can give no assurance that these expectations will
prove to have been correct. It is possible that actual results will
differ, possibly materially, from the anticipated results indicated
in these statements. These statements are subject to certain risks,
uncertainties and assumptions, including
risks relating to Apollo’s dependence on certain key personnel,
Apollo’s ability to raise new Apollo funds, the impact of COVID-19,
the impact of energy market dislocation, market conditions, and
interest rate fluctuations, generally, Apollo’s ability to manage
its growth, fund performance, the variability of Apollo’s revenues,
net income and cash flow, Apollo’s use of leverage to finance its
businesses and investments by Apollo funds, Athene’s ability to
maintain or improve financial strength ratings, the impact of
Athene’s reinsurers failing to meet their assumed obligations,
Athene’s ability to manage its business in a highly regulated
industry, changes in Apollo’s regulatory environment and tax
status, litigation risks and Apollo’s ability to recognize the
benefits expected to be derived from the Merger. Apollo believes
these factors include but are not limited to those described under
the section entitled “Risk Factors” in the joint proxy
statement/prospectus filed by Apollo Global Management, Inc.
(formerly known as Tango Holdings, Inc.) with the Securities and
Exchange Commission (the “SEC”) on November 5, 2021, Apollo Asset
Management Inc.’s (“AAM,” formerly known as Apollo Global
Management, Inc.) Annual Report on Form 10- K filed with the SEC on
February 19, 2021 and Quarterly Report on Form 10-Q filed with the
SEC on May 10, 2021, and Athene’s Annual Report on Form 10-K filed
with the SEC on February 19, 2021, amendment to its Annual Report
on Form 10-K/A filed with the SEC on April 20, 2021 and Quarterly
Report on Form 10-Q filed with the SEC on November 8, 2021, as such
factors may be updated from time to time in Apollo’s, AAM’s or
Athene’s periodic filings with the SEC, which are accessible on the
SEC’s website at http://www.sec.gov. These factors should not be
construed as exhaustive and should be read in conjunction with the
other cautionary statements that are included in this Current
Report on Form 8-K and in other filings. Apollo undertakes no
obligation to publicly update or review any forward-looking
statements, whether as a result of new information, future
developments or otherwise, except as required by applicable law.
This Current Report on Form 8-K does not constitute an offer of any
Apollo fund.
No Offer or Solicitation
This Current Report on Form 8-K is for informational purposes only
and not intended to and does not constitute an offer to subscribe
for, buy or sell, the solicitation of an offer to subscribe for,
buy or sell or an invitation to subscribe for, buy or sell any
securities or the solicitation of any vote or approval in any
jurisdiction pursuant to or in connection with the proposed
transaction or otherwise, nor shall there be any sale, issuance or
transfer of securities in any jurisdiction in contravention of
applicable law.
Non-GAAP Disclosures and Reconciliation
This report contains financial information that is calculated and
presented on the basis of methodologies other than in accordance
with accounting principles generally accepted in the United States
(“non-GAAP measures”). There are limitations inherent in non-GAAP
measures because they exclude certain charges and credits that are
required to be included in a GAAP presentation. Non-GAAP measures
should not be considered in isolation from, or as a substitute for,
financial information presented in compliance with GAAP, and
non-GAAP measures as used by Apollo may not be comparable to
similarly titled measures used by other companies.
The table below sets forth a reconciliation of common stock
outstanding to DE shares outstanding:
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Share Reconciliation (in millions) |
December 31,
2021 |
January 6,
2022 |
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Total GAAP Class A Common Stock Outstanding |
249 |
571 |
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Non-GAAP Adjustments: |
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Participating Apollo Operating Group Units |
185 |
- |
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Vested RSUs |
18 |
18 |
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Unvested RSUs Eligible for Dividend Equivalents |
10 |
11 |
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Distributable Earnings Shares Outstanding1
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461 |
600 |
1.Numbers
are approximate and may not sum to totals due to rounding. Shares
outstanding as of December 31, 2021 for Apollo Global Management,
Inc. (now known as Apollo Asset Management, Inc.), prior to the
merger with Athene. Shares outstanding as of January 6, 2022 for
Apollo Global Management, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the Registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly
authorized.
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Apollo Asset Management, Inc. |
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Date: January 27, 2022 |
By: |
/s/ Martin Kelly |
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Martin Kelly |
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Chief Financial Officer |
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