Corebridge, Equitable stocks get a bump after 'surprise' merger news

Corebridge Financial Inc. and Equitable Holdings Inc. shares finished the week in the green following the announcement that the two would undergo an all-stock merger.

Corebridge and Equitable announced March 26 that they would create a retirement, life, wealth and asset management company in an all-stock transaction valued at about $22 billion, based on the closing stock price of each company as of March 25.

Corebridge finished the week up 5.3% as of the close of business March 26, and Equitable shares were up 3.2%. During the same time period, the S&P 500 ticked down 0.5% and the S&P 500 US Insurance Index finished down 0.1%.

TD Cowen analyst Daniel Bergman called the deal a "surprise" in a note, adding that there has not been much of a precedent for this type of transaction in the sector.

"While we do not see the merger as a magic bullet to improve Corebridge's valuation near term, it creates a more diversified company and gives Corebridge access to strong/valuable asset and wealth management franchises," Bergman said. "While there are integration risks, the expected cost synergies are substantial, with likely upside over time from other sources."

Deal details

As part of the merger, the two life insurers plan to build a new parent company, with each outstanding Corebridge common share slated to be exchanged for 2 shares of the new parent company. Meanwhile, each outstanding Equitable common share will be swapped for about 1.55516 shares of the new parent entity. The new combined entity will conduct business under the Equitable name and brand and will also trade under Equitable's ticker, EQH.

Once the deal closes, Corebridge shareholders will own about 51% of the combined company, and Equitable shareholders will own the other 49%.

Leadership of the new company will be pulled from each insurer, with Corebridge President and CEO Marc Costantini shifting to president and CEO of the combined company, and Equitable CFO Robin Raju taking on the CFO role for the conglomerate.

In a conference call following the deal announcement, Raju said he expects minimal loss of business related to duplication as the two insurers merge. He also touted the transaction as a "huge opportunity for revenue synergies."

Jefferies analyst Suneet Kamath said in a note that the deal announcement also came as a surprise to him, particularly because of the companies' "low stand-alone valuations."

"Moreover, the combination of ongoing private credit concerns and a lack of near-term buybacks could pressure both stocks over the coming months," Kamath said. "That said, we have long viewed Equitable's integrated retirement model — full value chain/multiple revenue streams — as best in class and feel this deal makes this model bigger and more compelling."

Corebridge and Equitable did not provide a comment prior to publication deadline.

The deal should also effectively halt share repurchases for both insurers until they are able to hold shareholder votes, which is not expected to take place until the third quarter.

"While the lack of buybacks could be a near-term headwind, we feel the deal aligns well with our annuity growth thesis and favorable view of an integrated retirement business model," Kamath said.

The deal already has unanimous approval from both boards of directors and is anticipated to close by the end of 2026, pending customary closing conditions. The merger agreement also includes a $475 million termination fee that Equitable or Corebridge must pay if certain conditions are met.