Aon buys Willis for $30bn in world’s largest insurance deal

May 2020 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

May 2020 Issue

Aon is to acquire Willis Towers Watson in an all stock deal worth nearly $30bn. The deal is the insurance sector’s largest ever merger.

The merger will combine the industry’s second and third largest brokers, creating a new industry-leading company worth almost $80bn. The deal was first mooted in 2019, however it was quickly shelved. The firms made a regulatory filing on 5 March 2019 following discussions about a merger, but Aon walked away the next day. The revived deal will see the businesses unite under the Aon brand, with Aon maintaining its operating headquarters in London, though it will retain a “significant presence” in Chicago, New York and Singapore. The newly merged firm will focus on risk, retirement and health.

According to the terms of the transaction, Willis shareholders will receive 1.08 Aon shares for each of their shares. The offer represents a premium of 16 percent to Willis’ closing price on Friday 9 March, the last day of trading before the deal was announced.

Aon shareholders will own about 63 percent and Willis investors about 37 percent of the combined company. The deal is expected to add to Aon’s adjusted earnings per share in the first full year, with full savings of $800m achieved in the third year. The transaction is subject to regulatory and shareholder approvals and other customary closing conditions, but is expected to complete in the first half of 2021.

“The combination of Willis Towers Watson and Aon is a natural next step in our journey to better serve our clients in the areas of people, risk and capital,” said John Haley, chief executive of Willis Towers Watson. “This transaction accelerates that journey by providing our combined teams the opportunity to drive innovation more quickly and deliver more value.”

“This combination will create a more innovative platform capable of delivering better outcomes for all stakeholders, including clients, colleagues, partners and investors,” said Greg Case, chief executive of Aon. “Our world-class expertise across risk, retirement and health will accelerate the creation of new solutions that more efficiently match capital with unmet client needs in high growth areas like cyber, delegated investments, intellectual property, climate risk and health solutions.”

The combined company will be led by Mr Case and Aon’s chief financial officer, Christa Davies. Mr Haley will become executive chairman of the newly combined company. Aon employs 50,000 people in 120 countries worldwide. Willis has 45,000 employees across more than 140 countries and markets.

According to the announcement, Willis and Aon expect the transaction to generate more than $10bn in shareholder value through expected pre-tax synergies, based on the blended 2020 price to earnings ratio of Willis and Aon on 6 March 2020, including $2bn in expected one-time transaction, retention and integration costs.

There was speculation that regulatory concerns may have played a part in the decision to abandon the mooted 2019 merger. Whether regulatory issues will impact the newly announced transaction remains to be seen. Should this deal collapse, Aon would be liable to pay a $1bn breakup fee.

Willis Towers was formed in 2016 through Willis Group Holdings Plc’s $8.9bn acquisition of the consultancy Towers Watson & Co, the largest insurance broker deal at that time.

Richard Summerfield