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

Arthur J. Gallagher is reported to be the likely buyer of a roughly $3 billion divestment package from rivals Aon and Willis Towers Watson (WTW) as the largest merger in insurance and reinsurance broking history continues to move towards a close. Update: A deal was announced on May 12th.

It’s also being reported that the European Commission is now on the verge of giving its approval to Aon’s acquisition of Willis Towers Watson (WTW), with senior officials said to be on-side with the deal.

Critical to getting the approval of the European Commission (EC) has been Aon’s proactive offers of remedies and divestments, which now look set to far surpass the merger cap of $1.8 billion, if the reports are correct.

The hub of the divestment package appears to be reinsurance broking unit Willis Re, which makes up the largest single chunk of the mooted $3 billion of remedies.

Bloomberg has reported that Arthur J. Gallagher is in talks to buy the roughly $3 billion of Aon and Willis Towers Watson (WTW) assets, with talks ongoing but though likely to reach their culmination within weeks at most.

As a reminder, the remedy proposal made to the EC by Aon featured: WTW’s reinsurance unit Willis Re; a number of WTW European corporate risk broking units including Gras Savoye in France, as well as Dutch, German and Spanish entities; specific WTW units in FinPro and cyber in the UK; plus there are rumours that other countries broking units could be included (Italy, Poland and Portugal); certain aerospace manufacturing and space broking teams that could also be on the block; and the retirement benefits business of Aon in Germany.

As we’ve reported before, it’s a very European focused divestment package, but the inclusion of global reinsurance unit Willis Re will also go some way to getting foreign antitrust authorities onside as well, although some further region specific remedies may also be needed to gain global approval.

It’s also been reported that the EC competition team are aligned on approving the deal, with even senior European Commission executive Margrethe Vestager said to be ready to support its completion.

It’s said the approval could come at any time, although it does open up the question of whether the divestment deal agreement needs to be reached first, or whether approval will be, as we’d previously said, given as conditional on the divestments being made.

For Arthur J. Gallagher, the divestment package being reported is a significant addition to the firms operations, particularly on the reinsurance and corporate risk broking sides.

Our sources tell us that the conversation is not so much about price, but about ensuring that as many employees of units like Willis Re stay with the unit after an acquisition, with concerns heightened by recent defections within the broking space.

That is going to be critical, for Gallagher or whoever buys units like Willis Re.

As retaining the talent and therefore the contacts and relationships they have, is the first rule of reinsurance and other area broking acquisitions.

We’re also told that other brokers, once through in the running for the acquisition of Willis Re, are proactively approaching teams within that business they know, to gauge their interest in moving shops anyway.

All of which makes an acquisition a little fraught, as in the insurance and reinsurance broking market right now there are no guarantees that what you agreed to buy is exactly what you inherit when the deal gets done.

Value can leak out of the acquisition due to teams moving home and that is something any buyer of the Aon and WTW divestment package items, including Gallagher, will desperately want to avoid.

Also read:

– 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.