In response to rising questions raised by the European Commissioner regulators Aon and Willis Towers Watson announced a definitive agreement to sell both Willis Re and a “set of Willis Towers Watson corporate risk and broking and health and benefits services” to the broker Gallagher. The deal, valued at $3.57 billion. will help the companies’ ongoing objective to obtain regulatory approval for the Aon – Willis Towers Watson merger announced last year, including here in the U.S where regulators are conducting their own independent review of the deal.
“We announced this combination knowing that the complementary capabilities of our two firms would allow us to deliver more value to clients and opportunities for colleagues. The events of the last year have only reinforced that rationale, and this announcement is an important step toward realizing that potential,” said John Haley, Willis Towers Watson’s CEO. “We appreciate the extraordinary value these colleagues have delivered to our clients and our company. We are confident they have a bright future at Gallagher.”
Based in Rolling Meadows, Illinois, Arthur J. Gallagher, or now simply called Gallagher, is a global insurance broker with more than 34,000 employees in 56 countries. As of the year-end in 2020, it had generated more than $6 billion in 2020 revenue. In terms of its agreement with Aon and Willis Towers Watson, the firm has agreed to purchase the following assets:
- Willis Re operations globally, excluding operations in mainland China and Hong Kong;
- Global cedent facultative reinsurance, excluding operations in mainland China and Hong Kong;
- Corporate Risk and Broking business unit known as Inspace globally and certain business undertaken for Aerospace Manufacturing clients;
- Corporate Risk and Broking services in certain countries in Europe (France, Germany, the Netherlands and Spain), excluding Affinity; Bermuda; cyber in the UK; and certain accounts in the Houston and San Francisco offices in the U.S.;
- Corporate Risk and Broking services for Property & Casualty and Finex insurance in the European Economic Area, UK, U.S., Brazil and Hong Kong relating to certain large multinational companies headquartered in France, Germany, the Netherlands and Spain;
- Corporate Risk and Broking Finex accounts relating to certain large multinational companies headquartered in the UK; and
- Health & Benefits business units in France, Spain and Germany.
“This agreement demonstrates strong momentum on the path to close our proposed combination with Willis Towers Watson,” said Greg Case, Aon’s CEO. “We’ve used this time to align our future leadership team around a one-firm culture that will create new opportunities for colleagues, accelerate innovation on behalf of clients and deliver shareholders the long-term value creation they have come to expect from our team.”
The Aon – Willis Tower Watson merger
In March 2020, Aon announced its plans to form a “strategic alliance” with Willis Towers Watson with the goal of creating a unified global platform. The announcement came almost a year to the date after the first attempt by Aon to acquire WTW. In this latest announcement, Aon reaffirmed its commitment to completing the merger by highlighting some of the benefits from the pending merger including:
- Revenue growth, margin expansion through delivery of better solutions, increased cash flow and earnings growth and a strong balance sheet, to generate attractive returns for shareholders in the future.
- $800 million of cost synergies, taking into account this divestiture and other potential remedies.
- Allocation of any divestiture proceeds according to Aon’s ROIC framework, in which the firm expects that share buyback will continue to be its highest return activity.
- Accretion to adjusted EPS, reflecting the synergy potential of the combination, consistent with initially announced accretion projections in year three and over the long term.
Both the sale and merger are expected to close later this year
Aon noted that the deal with Gallagher is contingent both on the completion of the pending Aon and Willis Towers Watson merger, as well as other customary closing conditions associated with this type of sale. Both Aon and WTW are expecting that the completion of their merger will be completed during the third quarter of 2021, with the Gallagher deal then following the close of that transaction.
Berkshire Hathaway Buys Big Stake in Aon
Reuters is also reporting this week that Berkshire Hathaway has taken a $943 million stake in the Aon Plc. According to the newswire, the disclosure was made in a regulatory filing listing all of the holding company’s U.S.-listed holdings as of March 31st. The move follows Berkshire’s investment in another global insurance brokerage firm, Marsh & McLennan, earlier this year.