Aon to Acquire Willis Towers Watson in All-Stock Deal Valued at $30 Billion -- 2nd Update

By Ben Dummett

Aon PLC agreed Monday to acquire rival Willis Towers Watson PLC for almost $30 billion in stock, the biggest global M&A deal of the year announced on one of the wildest days for markets in recent memory.

The new company will be named Aon, with headquarters in London, and will have a combined market value of about $80 billion.

The deal's timing is surprising as it comes as equity markets are spiraling downward amid the fallout from the spread of the coronavirus and an oil price war between Russia and Saudia Arabia. U.S. equity markets where both stocks are listed plunged 7% Monday, triggering a temporary halt to trading for 15 minutes. While the stock deal valued Willis Towers at $29.9 billion based on the companies' closing price Friday, the market's plunge had wiped out close to $3 billion of deal value in morning trading in New York. That still made it by far the biggest deal of the year ahead of the more than $19 billion sale by Germany's Thyssenkrupp AG of its elevator business last month.

Several European companies have braved the broader market volatility to make big bets recently. The Aon-Willis Towers deal falls on the same day that U.K. grocery-chain operator Tesco PLC agreed to sell its Asia operations to Thailand's richest family for $10.58 billion. Overall, total deal value in Europe is up 42% so far this year to $140.4 billion, according to Dealogic.

The Aon deal, which comes as insurance brokers consolidate to reach new markets and try to expand their product offering, follows a deal by Marsh & McLennan Cos., another global insurance broker, to buy the U.K.'s Jardine Lloyd Thompson Group PLC in a GBP4.3 billion ($5.63 billion) pact in 2018. That deal was based on a desire to gain greater access to higher growth markets in Asia and Latin America, while bolstering its specialty risk-management operations.

The Aon-Willis Towers combination aims to combat that increased competitive threat, creating a global insurance broker with combined annual revenue of more $20 billion and the ability to extract pretax cost and other annual savings of $800 million to help boost profit.

Insurance brokerages help companies buy insurance and advise companies on risk management, but are consolidating at a rapid rate following years of sluggish commercial-insurance pricing growth. Aon, which is incorporated in England and Wales, and Ireland-based Willis Towers operate across sectors, focusing on areas such as advising on employment benefit plans, as well as providing property and liability brokerage services, health and benefit solutions and investment management consulting services through risk underwriting and reinsurance brokering.

By combining, the companies are betting that the deal will allow them to develop new products more quickly, particularly to address growing needs of clients to manage the risks generated from cybercrime, climate change and intellectual property.

Aon is using stock to finance the deal, avoiding the risk of loading up with debt to fund the tie-up. Further, Ion previously approached Willis Towers about acquiring the business last March and since then its stock has only surged making the deal more economically attractive.

In New York on Monday, however, Aon's stock recently traded down 14% to $183.93 under the challenges it will likely face integrating the acquisition. The companies said that they aim to complete the deal in 2021. Willis Towers was recently trading down 6.9% at $185.89

The deal also addresses succession planning at Willis Towers. John Haley, the company's chief executive, was expected to retire by the end of the year, according to a recent report by Gordon Haskett, and Willis Towers hadn't announced a succession plan. Under the Aon transaction, Mr. Haley, 70 years old, will assume the role of executive chairman. Greg Case, Aon's chief executive, will retain that role at the new company.

Under the terms of the deal each Willis Towers Watson shareholder will receive 1.08 Aon share for each Willis Towers Watson share. After the deal closes existing Aon shareholders will own approximately 63% and existing Willis Towers Watson shareholders will own approximately 37% of the combined company.

The deal is slated to close in the first half of 2021.

Kimberly Chin contributed to this article.

Write to Ben Dummett at ben.dummett@wsj.com

(END) Dow Jones Newswires

March 09, 2020 11:34 ET (15:34 GMT)

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