Insurance Brokers Sell Assets to Win Approval for $35 Billion Merger
By Ben Dummett
Aon PLC and Willis Towers Watson PLC on Wednesday agreed to sell
a package of assets to a smaller rival in an effort to win
antitrust approval for their $35 billion tie-up to create the
world's largest insurance broker.
The $3.57 billion deal with Arthur J. Gallagher & Co. comes
as Aon and Willis are under pressure to address concerns from the
European Union's executive arm around a combination of the No. 2
and No. 3 brokers.
The EU fears that, left unchecked, their merger would narrow
customer choice and give the combined entity too much sway over
prices for helping clients purchase financial protection against
property and casualty damages, trade tensions and cybercrime.
Together, the companies would have combined revenue of more than
$20 billion. That would top Marsh & McLennan Cos.' total of
$17.2 billion last year and dwarf the more than $6 billion
generated by Gallagher.
Aon and Willis, both registered in Ireland, are betting that the
asset sales to Gallagher would resolve the European Commission's
issues by allowing the rival broker to expand its business helping
insurers buy reinsurance or protection against claims and extend
its reach geographically.
"The agreement resolves questions raised by the European
Commission and is intended to address certain questions raised by
regulators in certain other jurisdictions," Aon and Willis said.
That includes the U.S., among other jurisdictions. The Gallagher
deal is dependent on the Aon-Willis transaction proceeding.
Aon and Willis aim to complete their tie-up by the end of
September, assuming it gains regulatory approval. It was first
announced more than a year ago, by far the biggest global
transaction at the time. But it came amid a market selloff
triggered by the spread of Covid-19 that wiped out $5 billion of
deal value on the first day of the merger plans becoming
Since then, investors had worried the deal risked collapsing
because of the companies' earlier reluctance to sell assets to
appease regulators. But the Gallagher pact underscores Aon's and
Willis's determination to prove the naysayers wrong.
The companies are counting on the merger to generate annual cost
savings of $800 million and boost revenue through the sale of new
products to help clients manage risks stemming from areas including
climate change and intellectual property.
Europe's antitrust watchdog declined to comment. It is set to
make its decision on the deal by Aug. 3.
Asset sales are a fairly common requirement for companies to win
commission approval in large and complex deals by allowing the
competition to also bulk up.
Last year, London Stock Exchange Group PLC agreed to sell Borsa
Italiana Group for EUR4.33 billion, equivalent to $5.26 billion, to
rival Euronext NV ahead of the regulator signing off on the LSE's
$15 billion acquisition of Refinitiv Holdings Ltd. And in 2019,
Jardine Lloyd Thompson Group PLC sold its aerospace insurance
brokerage business to Gallagher, paving the way for Marsh to win
regulatory approval to acquire JLT for about $5.6 billion.
A big part of Willis's global reinsurance brokerage business is
among the assets Gallagher is buying as a result of the proposed
Aon-Willis deal. The planned purchase would catapult the
Illinois-headquartered company into the top three insurance brokers
alongside the combined Aon-Willis and Marsh, according to
In December, the EU had warned that the Aon-Willis deal would
eliminate a key competitor in this area, potentially reducing
choice for insurance companies placing their risks with reinsurance
providers without the emergence of an alternative to replace
Gallagher is also acquiring several other businesses in the
areas of corporate risk and brokering and health-benefits services
in parts of Europe, the U.S. and Asia, Aon and Willis said.
Write to Ben Dummett at firstname.lastname@example.org
(END) Dow Jones Newswires
May 12, 2021 10:23 ET (14:23 GMT)
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