Brighthouse Financial (BHF 0.32%) was spun out of MetLife (MET 2.09%) in 2017. It operates a life insurance and asset management business. On the surface, it isn't a particularly exciting operation, and its financial performance has been volatile since it became a stand-alone company. But based on its current stock price of around $60 per share, there's the potential for investors to see a very swift 15% gain. Here's what you need to know.
What's going on with Brighthouse Financial
When Brighthouse Financial reported its fourth-quarter 2025 earnings, the most important update came near the end of the release. It was an update on the insurance company's pending acquisition by Aquarian Capital. The key news is that Brighthouse Financial shareholders have approved the deal.
Image source: Getty Images.
The next step is getting the necessary regulatory approvals, which Brighthouse Financial expects to happen sometime in 2026. Assuming regulatory approval is received, Aquarian Capital will complete its purchase of Brighthouse Financial for $70 per share. Some simple math shows that buying Brighthouse Financial now would yield a gain of around 15%.
That gain is likely to happen very quickly after regulatory approval is received, assuming things go as planned. It is important to put the 15% upside on offer into context. Most investors expect stocks to return around 10% a year. And the potential gain from this merger arbitrage opportunity is likely to take place in less than a year, so if you annualize the return, it would be even higher.
Merger arbitrage is not risk-free
The problem is that there is always a risk that an acquisition like this won't go according to plan. That's why the market price is below the agreed-upon acquisition price. The difference is particularly wide in this situation, suggesting that Wall Street is worried regulators won't approve the deal as currently envisioned.
NASDAQ: BHF
Key Data Points
If Aquarian Capital walks away from the deal, Brighthouse Financial's stock would likely fall back to the levels it traded at prior to the acquisition announcement. That could mean a downside move to around $48 per share. That's a material drop from $60 and would lead to a potential loss of 20%.
Most investors should stick to buy-and-hold investing
Merger arbitrage can be a fairly low-risk special situations investment approach. However, there are still risks to consider, and those practicing the approach need to be well versed in both acquisitions broadly and the specific companies involved. It is difficult to do consistently unless you are focused solely on this type of investing.
Although there's an interesting opportunity with Brighthouse Financial today, most investors will probably be better off focusing on buying good companies and holding them for the long term.
