8-K: Lincoln Financial Announces $825 Million Strategic Investment from Bain Capital

Lincoln Financial will sell a 9.9% stake to Bain Capital for $825 million, forming a strategic partnership to accelerate growth and enhance asset management.

Summary

• Lincoln National Corporation (LNC) has entered into a stock purchase agreement with Bain Capital Prairie, LLC, a subsidiary of Bain Capital.
• Lincoln Financial will sell 18,759,497 shares of its common stock, representing approximately 9.9% of the outstanding shares on a post-issuance basis.
• The aggregate consideration for the shares is approximately $825 million in cash.
• The number of shares and consideration are subject to reduction if the number of outstanding shares decreases before the transaction closes.
• Bain Capital will become a strategic asset management partner, managing $1.4 billion of Lincoln's general account assets initially, increasing to a minimum of $20 billion over six years.
• The transaction is expected to close in the second half of 2025, subject to regulatory approvals and customary closing conditions.
• Lincoln Financial will host an investor call on April 9, 2025, to discuss the announcement.

Sentiment

Score: 8

Explanation: The announcement is positive due to the significant investment from Bain Capital, the potential for enhanced returns, and the improved financial flexibility for Lincoln Financial. The strategic partnership is expected to drive long-term value creation.

Positives

• The $825 million investment provides Lincoln Financial with growth capital.
• The partnership with Bain Capital enhances access to diverse private asset classes with strong risk-adjusted returns.
• The transaction improves financial flexibility by reducing Lincoln's leverage ratio.
• The deal is expected to be accretive to free cash flow per share by 2027.
• Bain Capital's investment management will increase spread-based earnings.

Negatives

• The transaction is subject to customary closing conditions, including regulatory approvals, which could delay or prevent the closing.
• The number of shares purchased by Bain Capital may be reduced if the number of outstanding shares of Common Stock decreases between the signing of the Purchase Agreement and closing of the Transaction.

Risks

• The ability of Lincoln to consummate the transaction with Bain Capital is not guaranteed.
• The expected benefits related to the transaction may not materialize as expected.
• The transaction may not be timely completed, if completed at all.
• Legal proceedings could be instituted against Lincoln, Bain Capital, or their respective directors, officers, or employees.
• New risk factors may emerge that could affect Lincoln's businesses or the extent to which any factor may cause actual results to differ materially from those contained in any forward-looking statements.

Future Outlook

Lincoln Financial expects the partnership with Bain Capital to accelerate its strategic priorities, including growing spread-based earnings, optimizing its legacy life block, and increasing overall free cash flow.

Management Comments

• Ellen Cooper, Chairman, President and Chief Executive Officer of Lincoln Financial, stated that the partnership aligns Lincoln with a highly reputable organization and will enable them to accelerate the execution of their strategy.
• David Gross, Co-Managing Partner at Bain Capital, said that the relationship reflects their commitment to advancing Lincoln's future by providing access to their high-quality investment platform and expertise across asset classes.

Industry Context

This announcement reflects a trend of insurance companies partnering with private equity firms to enhance investment returns and access alternative asset classes. This is especially relevant in a low-interest-rate environment where insurers seek higher yields to meet their obligations.

Comparison to Industry Standards

• Blackstone has similar arrangements with insurers like AIG and Resolution Life, managing significant portions of their portfolios.
• Apollo Global Management has a strong presence in the insurance sector through its ownership of Athene, an annuity provider.
• KKR also actively manages assets for insurance companies, leveraging its expertise in alternative investments.
• The $20 billion AUM target for Bain Capital is comparable to other large-scale asset management partnerships in the insurance industry.

Corporate Governance

Related Party Transactions

• Lincoln National Corporation will enter into an investment management agreement with Bain Capital Asset Management, LP, an affiliate of Bain Capital, to manage a portion of its general account assets.

Stakeholder Impact

• Shareholders will benefit from the growth capital and potential for enhanced returns.
• Employees may see new opportunities as the company expands its strategic initiatives.
• Customers may benefit from improved product offerings and financial stability.
• Suppliers and creditors may see increased business opportunities as Lincoln Financial grows.

Next Steps

• Obtain regulatory approvals for the transaction.
• Satisfy customary closing conditions.
• Close the transaction in the second half of 2025.
• Transfer $1.4 billion in assets to Bain Capital for management.
• Increase assets under management with Bain Capital to a minimum of $20 billion over six years.

Key Dates

Keywords

Bain Capital, Lincoln Financial, Strategic Partnership, Investment, Equity Stake, Asset Management, Growth Capital, Leverage Ratio, Private Assets, Transaction