UK authority clears AJG’s acquisition of Willis Re

The UK government’s Competition and Markets Authority (CMA) said this morning that it has ended its investigation of the pending acquisition of the Willis Re treaty reinsurance business of Willis Towers Watson (WTW) by Arthur J. Gallagher (Gallagher) and cleared the deal to proceed.

The Authority said that it will not take its investigations of the merger to the next stage, known as Phase 2.

Arthur J. Gallagher & Co. agreed to pay $3.25 billion to acquire the treaty reinsurance brokerage operations of Willis Towers Watson’s Willis Re unit back in August.

Gallagher had been lined up to acquire a range of assets from Willis Towers Watson as part of the divestments needed to seal the Aon and WTW merger, including Willis Re.

After the Aon and WTW merger was abandoned, the potentially transformational acquisitions of reinsurance broking unit Willis Re and a range of major corporate broking units from WTW appeared to have been taken away from Gallagher.

But, AJG quickly rekindled discussions directly with WTW and came to an agreement that would see Gallagher get the reinsurance broking growth it had been seeking, with the acquisition of all of Willis Re’s treaty broking operations.

Then, in October, the UK government’s Competition and Markets Authority (CMA) said it was investigating the planned merger.

The CMA said at the time that it was looking into whether “it is or may be the case that this transaction, if carried into effect, will result in the creation of a relevant merger situation under the merger provisions of the Enterprise Act 2002 and, if so, whether the creation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.”

It was a Phase 1 investigation, so preliminary, with a deadline set of November 29th to make a decision on whether to take Gallagher’s acquisition of Willis Re to Phase 2.

Now, that decision has come a little earlier, it seems, as the CMA said that based on the information available to it, it will not take the investigation to the Phase 2 level, suggesting no competition related issues were uncovered.

Which is good news for the merger parties, giving them a green-light to proceed for the UK at least.

The acquisition of Willis Re could close as early as by the end of this quarter, or at latest in Q1 2022.

As a reminder, AJG’s acquisition includes insurance-linked securities (ILS) and capital market specialist unit Willis Re Securities, so providing Gallagher with a dedicated capital market reinsurance focused team and for the first time.

Gallagher’s reinsurance broking unit, Gallagher Re is experienced in placing reinsurance and retrocession business with ILS fund markets and trading in collateralized structures as well.

AJG also owns prolific ILS market facilitator Horseshoe of course.

So with the Willis Re Securities team offering specific expertise in structuring and bookrunning catastrophe bonds, as well as in reinsurance sidecar arrangements and other capital market instruments and transactions, Gallagher’s ILS market service offering will cover the full lifecycle of issuance and management, once the merger completes.