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

Broking giants Aon and Willis Towers Watson (WTW) are one step closer to completing their planned merger, announcing the agreement of a sale of assets to rival Gallagher in a package valued at $3.57 billion and including reinsurance broking arm Willis Re.

Arthur J. Gallagher & Co. (Gallagher) will acquire reinsurance unit Willis Re and a set of Willis Towers Watson corporate risk and broking and health and benefits services, with these business units set to be divested for a total consideration of $3.57 billion, the companies said.

As expected (because this news is not really a surprise given all the media chatter), this agreement with Gallagher is expected to specifically resolve questions raised by the European Commission, but is also intended to address questions raised by regulators in other jurisdictions as well, the insurance and reinsurance broking giants have said.

The companies said that they, “continue to work toward obtaining additional regulatory approval in all relevant jurisdictions, including the United States, where regulators are conducting an independent review of the Aon and WTW combination.”

As we’ve explained a number of times, the EC focused divestment remedy offer from Aon was always seen as likely to answer many global concerns, enabling other jurisdictions regulators to take that into account before adding any region-specific divestment needs on top.

Gallagher has agreed to purchase the following package of Willis Towers Watson units:

• Willis Re operations globally, excluding mainland China and Hong Kong;
• Global cedent facultative reinsurance, excluding mainland China and Hong Kong;
• Corporate Risk and Broking business unit 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.

It’s a significant package of divestments, although its being reported as only amounting to $1.3 billion of estimated pro forma revenue, which is well below where some analysts had pegged the value as being.

“This agreement demonstrates strong momentum on the path to close our proposed combination with Willis Towers Watson,” explained 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.”

“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,” added 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.”

Aon and WTW continue to believe that their transaction will “accelerate innovation on behalf of clients.”

At the same time, Aon said that it “remains committed to $800 million of cost synergies and expects the combination to create significant shareholder value.”

The target date for completion of the merger has slipped again, with the companies now saying they expect it to close ” as soon as possible during the third quarter of 2021.”

Gallagher’s acquisition of this $3.57 billion package is contingent on the merger of Aon and WTW going ahead, as well as all closing conditions being satisfied.

Aon said that the completion of its acquisition of WTW “remains subject to the receipt of required regulatory approvals and clearances, including with respect to United States antitrust laws, as well as other customary closing conditions.”

AJG CEO Pat Gallagher explained that the acquisition will significantly expand the firms global reinsurance value proposition.

Also read:

– 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.