London:
Aon, the second largest global re/insurance broker, is set to acquire Willis Towers Watson for $30bn (£22.9bn), the third largst international re/insurnace broker, in an all-stock transaction which values the combined businesses at approximately $80bn (£61.1bn),creating the world's largest insurance broker but is almost certain to face regulatory hurdles..
Upon completion, the combined firm will go to market under the Aon brand, and will maintain operating headquarters in London, UK.The $30bn deal will see the combined business operate under the Aon brand led by Aon CEO Greg Case, with the transaction expected to go through in the first half of 2021.
The two companies said in a statement today (9 March) that the deal combines two “highly complementary businesses” into a technology-enabled global platform.
Recently, Marsh & McLennan Cos. (MMC) had completed its $5.6 billion acquisition of Jardine Lloyd Thompson Group plc (JLT).
The acquisition advances Marsh & McLennan’s leadership position in insurance and reinsurance brokerage, health and retirement, with a global reach in more than 130 countries, the company said in a statement.
Following the deal, WTW chief executive officer, John Haley, will take on the role of executive chairman with a focus on growth and innovation strategy.
Current Aon CEO, Greg Case, will lead the combined firm alongside Aon chief financial officer, Christa Davies and a leadership team reflecting the capabilities of both organisations.
According to the business, the new board of directors will comprise proportional members from Aon and WTW’s current directors.
Journey Haley commented: “The combination of Willis Towers Watson and Aon is a natural next step in our journey to better serve our clients in the areas of people, risk and capital.
“This transaction accelerates that journey by providing our combined teams the opportunity to drive innovation more quickly and deliver more value,” he said,
Greg Case, CEO of Aon, added: “This combination will create a more innovative platform capable of delivering better outcomes for all stakeholders, including clients, colleagues, partners and investors.
“Our world-class expertise across risk, retirement and health will accelerate the creation of new solutions that more efficiently match capital with unmet client needs in high-growth areas like cyber, delegated investments, intellectual property, climate risk and health solutions.”
Analysts said that an Aon-Willis deal might have trouble clearing anti-trust hurdles and Aon's shares plunged nearly 11% in pre-market trade, while Willis' shares rose just 3.14%, although both moves came in a market hit heavily by Monday's collapse in oil prices.
"The insurers and re-insurers are unlikely to be happy about the deal given the scale of the two players coming together," said analyst Ben Cohen at Investec.
The deal terms state Aon will be obligated to pay a fee of $1 billion to Willis if the deal were to fall through.
Aon Chief Financial Officer Christa Davies said she was confident of getting all the "necessary approvals" for the deal.
The deal follows other moves to consolidate the global insurance business. Marsh last April sealed its own purchase of British rival Jardine Lloyd Thompson for $5.7 billion, at the time cementing its position as the biggest global player.
Cost reductions
The statement further revealed that Aon anticipates that the transaction will provide annual pre-tax synergies and other cost reductions of $800m by the third full year of combination. It explained that the principal sources for cost reductions would be from consolidating business and central support functions as well as consolidating infrastructure related to technology, real-estate and third-party contracts.
Upon completion existing Aon shareholders will own approximately 63% of the business and existing WTW shareholders will own approximately 37%.
This follows discussions between the two brokers which were made public in a regulatory filing on March 5 2019 and then quickly shot down a day later when Aon signalled its intention to walk away. Since then rumours of the deal have refused to go away.
When the deal closes, existing Aon shareholders will own about 63% and existing Willis investors will own about 37% of the combined company on a fully diluted basis.
Aon's financial advisor for the deal is Credit Suisse Securities, while Willis was advised by Goldman Sachs.