Aon’s acquisition of Willis Towers Watson cancelled, will pay break fee

Big news in the insurance and reinsurance broking world as Aon and Willis Towers Watson (WTW) said they have terminated their combination, or merger agreement, effectively cancelling Aon’s acquisition plans to become the largest player in the market.

Aon and Willis Towers Watson said they have, “agreed to terminate their business combination agreement and end litigation with the U.S. Department of Justice (DOJ).”

The $30 billion acquisition and merger had been announced in March 2020 and the pair have been working towards a combination ever since.

But challenges from an antitrust suit had threatened to delay the combination beyond the original merger agreement outside-date, something it now seems the insurance and reinsurance brokers weren’t prepared to push back waiting for a DOJ trial.

Now, Aon said it will pay the $1 billion termination fee to Willis Towers Watson, as thee proposed scheme of arrangement has now lapsed, and both organisations will move forward independently.

Today, Aon CEO Greg Case explained, “Despite regulatory momentum around the world, including the recent approval of our combination by the European Commission, we reached an impasse with the U.S. Department of Justice. The DOJ position overlooks that our complementary businesses operate across broad, competitive areas of the economy. We are confident that the combination would have accelerated our shared ability to innovate on behalf of clients, but the inability to secure an expedited resolution of the litigation brought us to this point.”

He also said, “Over the last 16 months, our colleagues have turned potential challenges into opportunities to advance our Aon United strategy. We built on our track record of innovation, continued to deliver industry-leading performance and progress against our key financial metrics and move forward with the strongest colleague engagement and client feedback scores in over a decade. Our respect for Willis Towers Watson and the team members we’ve come to know through this process has only grown.”

Willis Towers Watson CEO John Haley added, “Our team’s resilience and commitment are a source of pride and confidence. They have continued to bring to life Willis Towers Watson’s compelling value proposition to better serve our clients in the areas of people, risk and capital. Going forward, our focus remains steadfast on our colleagues, our clients and our shareholders. We believe we are well-positioned to compete vigorously across our businesses around the world and will continue to introduce important innovations to the market. We appreciate and deeply respect all the Aon colleagues we got to know through this process.”

Our sister publication Reinsurance News explained recently that while the US DOJ trial date was set to begin in November, there was a chance that an earlier settlement could have been reached on three of five areas of contention.

But it seems even that hope has not been enough to encourage the merger parties to stick with their process, preferring to abandon the deal rather than push for settlement there and hope the trial was not too lengthy and had the right outcome for them.

The market has increasingly been awash with discussion of the challenges the merger’s delay was putting on the parties, with significant numbers of staff leaving for other insurance or reinsurance brokers and even some concerns among ceding clients, we understand.

All of this, alongside the fact there really was no certainty that the US DOJ would follow on the heels of the European Commission in approving the deal, even with new concessions may have driven this abandonment of the deal.

While the potential for remedy demands to get too significant in the key United States marketplace may also have been a concern for the broking groups.

Analysts seem to believe Willis Towers Watson’s share price may tumble today, while Aon’s may actually benefit from removing the merger and integration related uncertainty.

Aon also today announced the extension of employment agreements for its CEO Greg Case and CFO Christa Davies for an additional three years, through April 1st 2026, as it likely tries to calm market nerves in advance of the opening.

Analysts at KBW said they were surprised by this news, as they felt Aon could still extract significant value from an acquisition of even a depleted and partially sold-off Willis Towers Watson.

The analysts also said they see more go-it-alone headwinds at WTW than at Aon, because of perceived CEO uncertainty at the company. This may also explain why Aon was so quick to come out with a message explaining its CEO would be sticking around.

Finally, the other angle to the collapse of this merger worth considering, is what it means for Arthur J. Gallagher (AJG), which was lined up to acquire a significant package of assets from WTW, including its reinsurance broker Willis Re.

Gallagher was looking at significant growth of its corporate risk and reinsurance broking divisions once this merger completed. But with the collapse of the Aon and WTW deals, it seems those planned acquisitions are unlikely to go ahead, unless of course WTW decides it still wants to shed any of those units.

Perhaps as expected, Aon’s share price rose by over 6.4% after the market open, while Willis Towers Watson’s fell by -7%, and AJG’s dropped around -3%.

We also discussed a possible opportunity opening up for AJG in this follow-up article.

Also read:

– Aon offers to sell more WTW interests to appease New Zealand regulator.

– EC clears Aon’s acquisition of Willis Towers Watson with conditions.

– Aon – Willis offered earlier US trial, but still past merger outside date.

– Failure of WTW merger over US DoJ trial date “unacceptable” – Aon.

– South Africa adds to Aon Willis merger divestiture load.

– Aon – Willis Towers Watson merger review by Singapore to deepen.

– Aon & WTW “surprised” by DoJ lawsuit. Gallagher ready to snap up divestitures.

– Divestitures more likely than Aon abandoning Willis deal: Analysts.

– US DOJ sues, says Aon Willis would be “broking behemoth”, parties disagree.

– Aon selling $1.4bn of US retirement units to address US DOJ merger questions.

– US DOJ may not challenge Aon / Willis Towers Watson merger: Report.

– Aon / WTW: Willis Re sale supported, as industry wants broker choice.

– Aon sells German pensions business to LCP, as further step towards WTW merger.

– Aon & WTW agree $3.57bn sale of assets to Gallagher, including Willis Re.

– Gallagher likely buyer of $3bn Aon – Willis (WTW) divestments: Report.

– Aon expected to get conditional WTW acquisition approval from EC: Reuters.

– EC asks for feedback on sale of Aon / WTW assets, as MMC gains talent.

– Aon in proactive offer to US DOJ on Willis Towers Watson merger: Report.

– Aon – Willis Towers Watson divestiture reports expand to US & Bermuda.

– EC extends Aon – Willis Towers Watson merger deadline again.

– Aon – Willis Towers Watson merger deadline pushed back by EC.

– Aon – Willis Towers Watson merger assessed by Singapore competition authority.

– Aon & Willis Towers Watson merger may face EC statement of objection: Reuters.

– Aon & Willis Towers Watson merger to “significantly lessen competition”.

– Aon & WTW cite alt. capital, disintermediation & marketplaces in defence of merger.

– Aon & Willis Towers Watson reveal leadership of combined company.

– Willis Re divestment seen necessary for Aon – WTW merger to complete.

– If Aon / WTW leads to divestitures, AJG seen as “best fit” for Willis Re: KBW.

– EC investigates Aon / WTW deal, cites competition “concerns”.

– Aon + WTW to “extend proven model of catastrophe bonds” – CEO’s Case & Haley.

– Aon & Willis Towers Watson to merge.