South Africa adds to Aon Willis merger divestiture load

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The value of divestments needed to get insurance and reinsurance broker Aon’s acquisition of rival Willis Towers Watson (WTW) over the line continues to increase, with South Africa the latest country who’s competition authority has requested a remedy specific to its marketplace.

aon-willis-towers-watsonThe Competition Commission of South Africa (CCSA) has recommended that the countries Competition Tribunal approve Aon’s proposed transaction to acquire Willis Towers Watson, but with conditions, the Commission said.

South Africa’s competition authority raises a number of areas of concern, noting that its investigation found that , “The proposed merger is likely to result in a substantial lessening and/or prevention of competition in the market for the provision of reinsurance broking services in South Africa.”

It went on to explain that, if completed, the merger “removes an effective competitor and by so doing raises the level of concentration in an already concentrated market.”

The Commission went on to say that after the merger, customers of the reinsurance services offered would find their choice limited to two main players in the market, and that the resulting larger Aon would “exercise market power in the reinsurance market post-merger.”

Similarly, in the corporate risk market, the Commission said that the merger would drive, “structural change in the corporate short-term insurance broking services which will likely result in a substantial loss of competition.”

Again, post-merger, the market of three main players with the ability to serve South Africa’s largest clients would be reduced to just two choices.

“The merger is therefore effectively a 3-to-2 merger,” the Commission warned, adding that it also received concerns from third parties regarding possible competition harm post-merger.

As a result, the South African Competition Commission has insisted on the following conditions to address the competition concerns arising from the proposed merger.

First, the divestment of Willis Towers Watson’s global reinsurance broking business units dedicated to treaty and facultative reinsurance services.

Of course, this is now being satisfied by the sale of Willis Re to rival Gallagher under a European Commission driven remedy package.

Second, the completion of the global remedy package sale of corporate risk broking entities, again part of the European Commission agreement on divestments needs to go through.

But onto this, the South African authority has tagged on an additional sale, as it said that “In South Africa, the merging parties offered to divest the entire Willis Towers short-term insurance broking services in South Africa to the same third party acquiring the divested reinsurance business.”

So that will be another acquisition for Gallagher, it’s assumed.

The Commission noted that this remedy package, “completely removes the overlaps between activities of the merging parties in relation to the provision reinsurance broking and short- term insurance broking services in South Africa and is likely to create a credible third competitor, thus restoring competition in both markets.”

As a result, it notes that the, “remedies tendered by the merging parties are sufficient to alleviate the competition concerns arising as result of the proposed merger.”

Meaning Aon can gain its approval and tick another competition or antitrust authority off the list of approvals sought and needed to get the deal with WTW over-the-line and consummate the merger.

Others may follow, as there are a number of global regulators still considering the merger details and whether any country specific additional divestments are required to be added to the growing list.

Also read:

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.

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