CHICAGO, July 12 /PRNewswire-FirstCall/ -- Aon Corporation
(NYSE: AON) and Hewitt Associates, Inc. (NYSE: HEW) announced today
that the boards of directors of both companies have approved a
definitive agreement under which Hewitt will merge with a
subsidiary of Aon. The aggregate consideration is valued at
$50 per Hewitt share, which
represents a 41% premium to Hewitt's closing stock price on
July 9, 2010, the last trading day
prior to the announcement of the agreement. The aggregate
fully diluted equity value of the transaction is approximately
$4.9 billion, consisting of 50% cash
and 50% Aon stock (based on the closing price of Aon common stock
on July 9, 2010).
Following the close of the transaction, Aon intends to integrate
Hewitt with its existing consulting and outsourcing operations (Aon
Consulting) and operate the segment globally under the newly
created Aon Hewitt brand. In addition, Russ Fradin, chairman and chief executive
officer of Hewitt, will serve as chairman and chief executive
officer of Aon Hewitt, reporting to Greg
Case, chief executive officer, Aon Corporation.
Hewitt is one of the world's leading HR consulting and
outsourcing companies. Hewitt helps more than 3,000 clients
and their employees around the world anticipate and solve their
most complex benefits, talent, and related financial challenges
through three primary business lines: consulting, benefits
outsourcing and HR business process outsourcing. Hewitt,
combined with Aon Consulting, will build upon those strengths,
creating a global leader in human capital solutions, with diverse
product and service capabilities and world-class associates to
effectively serve clients' evolving needs.
"This agreement reflects our ongoing efforts to ensure that
Aon's associates, capabilities and technology remain at the
forefront of our industry, providing distinctive client value,"
said Case. "As we continue to grow our business, this merger
will give us a broader portfolio of innovative products and
services focused on what we believe are two of the most important
topics in the global economy today – risk and people."
Case continued, "Aon and Hewitt share a focus on excellence in
client service and recognize the importance of talent in our
industry. A leading portfolio of client services and strong
cultural fit will enable us to quickly realize the benefits of this
transaction, and the value added for our clients, our associates
and our stockholders."
"We are extremely excited to join forces with another iconic
global brand to form the leading human capital services
enterprise," commented Fradin. "This combination allows us to
provide even more services for our clients and greater
opportunities for our associates. Aon and Hewitt share a
relentless commitment to our clients and to the associates who
serve them."
An integration team led by Greg
Besio (chief administrative officer, Aon) will commence
planning for a strong transition. The team is comprised of
leaders across Aon and Hewitt and includes: Kristi Savacool (senior vice president, Hewitt
Large Markets Benefits Outsourcing), Jim
Konieczny (president, Hewitt HR Business Process
Outsourcing), Yvan Legris
(president, Hewitt Consulting) and Kathryn
Hayley (co-chief executive officer, Aon Consulting).
Strategic Rationale of the Transaction
Aon believes the combination of Aon and Hewitt creates a global
leader in human capital solutions, benefitting clients, associates
and stockholders in several ways, including:
- Aon Hewitt revenues of $4.3
billion and 29,000 associates globally. Combined
revenues for fiscal year 2009 consist of 49% from consulting
services, 40% from benefits outsourcing and 11% from HR business
process outsourcing, creating more resources for associates and
more opportunities to distinctively serve clients with capabilities
in greater than 120 countries around the world;
- Leading global brand and client service recognition
worldwide. Premier Hewitt brand will be leveraged along
with Aon's client recognition for leading employee benefits
consulting firm;
- Complementary product and service portfolio across
consulting, benefits outsourcing and HR business process
outsourcing. Product portfolio will provide for
significant cross-sell opportunities including the marketing of
Hewitt's benefits outsourcing and HR business process outsourcing
services to Aon's clients, as well as the marketing of Aon's
industry-leading risk services product portfolio to Hewitt's
clients;
- Diversified presence across large corporate and middle
market. The combined client base will provide significant
cross-sell opportunities to leverage Hewitt's predominantly large
corporate client base with Aon's predominantly middle market client
base;
- Cost savings and operational efficiencies. The
transaction is expected to generate approximately $355 million in annual cost savings across Aon
Hewitt in 2013, primarily from reduction in back-office areas,
public company costs, management overlap and leverage of technology
platforms;
- Expect to achieve an operating margin in Aon Hewitt of
20%. Primarily through anticipated synergies and greater
economies of scale, Aon Hewitt expects to deliver improved
operational performance and a long-term operating margin of
20%;
- Expect to create $1.5 billion
of value creation. Strong cash flow generation of Hewitt,
combined with anticipated synergies from the combination, are
expected to deliver $1.5 billion of
value creation for stockholders on a discounted cash flow basis,
after subtracting the purchase price of the transaction.
Estimated EPS Accretion / Dilution
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2011
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2012
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2013
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EPS - GAAP
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-8.4%
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1.2%
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5.8%
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EPS - Adjusted
(1)
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1.2%
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5.4%
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5.8%
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(1) Excludes one-time
restructuring costs of $249 million ($168 million in 2011 and $81
million in 2012)
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Aon expects the transaction to be accretive on a GAAP EPS basis
in 2012 and on an Adjusted EPS basis in 2011. Aon expects the
transaction to be significantly accretive to cash earnings in 2011.
On a risk adjusted basis, the transaction is expected to
deliver an improvement of approximately 100 bps to return on
invested capital (ROIC) when compared to potential share repurchase
over the time-frame of the transaction.
Transaction Summary
Hewitt will merge with a subsidiary of Aon. Hewitt
stockholders will be entitled to receive for each share of Hewitt
common stock, $25.61 in cash and
0.6362 of a share of Aon common stock. Based on the closing
price of Aon common stock on July 9,
2010, the aggregate consideration paid on a fully diluted
basis is valued at $50 per Hewitt
share. The consideration represents a 41% premium to Hewitt's
closing stock price on July 9, 2010,
the last trading day prior to the announcement of the agreement.
The definitive agreement also contains an election procedure
allowing each Hewitt stockholder to seek all cash or all stock,
subject to proration and adjustment.
The aggregate fully diluted equity value of the transaction is
approximately $4.9 billion,
consisting of $2.45 billion of cash
and the issuance of 64.0 million shares, including the rollover of
certain Hewitt options into options to purchase Aon stock.
The consideration reflects a multiple of approximately 7.5
times Hewitt's fiscal year 2010 consensus estimates EBITDA.
Financing commitments from Credit Suisse and Morgan Stanley for
100% of the cash consideration are in place for a three-year
$1.0 billion bank term loan and a
$1.5 billion bridge loan
facility. Aon expects to issue unsecured notes prior to
drawing on the bridge loan facility.
The transaction is expected to close by mid-November, subject to
customary closing conditions, regulatory approvals, as well as
approval by both Aon and Hewitt stockholders.
Advisors
Credit Suisse acted as financial advisor to Aon, and Sidley
Austin LLP is serving as legal counsel. Citigroup Global
Markets Inc. served as exclusive financial advisor to Hewitt, and
Debevoise & Plimpton LLP and Paul, Weiss, Rifkind, Wharton
& Garrison LLP are serving as legal counsel.
Analyst and Investor Conference Call and Webcast
Details
Aon and Hewitt will host a conference call today, Monday, July 12, 2010 at 7:30 a.m. central time. Interested parties
can listen to the conference call by dialing (800) 369-3129 (within
the U.S.), (312) 470-7363 (outside of the U.S.) using access code:
Aon, or via a live audio webcast at www.aon.com and
www.hewitt.com.
Presentation slides that provide an overview of the transaction
will be available at both www.aon.com and www.hewitt.com prior to
the start of the conference call.
A replay of the conference call will be available for 30 days
following the live conference call, and can be accessed by dialing
(866) 417-5769 (within the U.S.) or (203) 369-0737 (outside of the
U.S.), using access code: 4913. The replay will also be
available at www.aon.com and www.hewitt.com.
About Hewitt
Hewitt Associates (NYSE: HEW) provides leading organizations
around the world with expert human resources consulting and
outsourcing solutions to help them anticipate and solve their most
complex benefits, talent, and related financial challenges.
Hewitt works with companies to design, implement,
communicate, and administer a wide range of human resources,
retirement, investment management, health care, compensation, and
talent management strategies. With a history of exceptional
client service since 1940, Hewitt has offices in more than 30
countries and employs approximately 23,000 associates who are
helping make the world a better place to work. For more
information, please visit www.hewitt.com.
About Aon
Aon Corporation (NYSE: AON) is the leading global provider of
risk management services, insurance and reinsurance brokerage, and
human capital consulting. Through its more than 36,000
associates worldwide, Aon readily delivers distinctive client value
via innovative and effective risk management and workforce
productivity solutions. Aon's industry-leading global
resources and technical expertise are delivered locally through
more than 500 offices in more than 120 countries. Named the
world's best broker by Euromoney magazine's 2008 and 2009 Insurance
Survey, Aon also ranked highest on Business Insurance's listing of
the world's largest insurance brokers based on commercial retail,
wholesale, reinsurance and personal lines brokerage revenues in
2008 and 2009. A.M. Best deemed Aon the number one insurance broker
based on brokerage revenues in 2007, 2008, and 2009, and Aon was
voted best insurance intermediary, best reinsurance intermediary
and best employee benefits consulting firm in 2007, 2008 and 2009
by the readers of Business Insurance. For more information on
Aon, log onto www.aon.com.
Safe Harbor Statement
This communication contains certain statements related to future
results, or states our intentions, beliefs and expectations or
predictions for the future which are forward-looking statements as
that term is defined in the Private Securities Litigation Reform
Act of 1995. These forward-looking statements are subject to
certain risks and uncertainties that could cause actual results to
differ materially from either historical or anticipated results
depending on a variety of factors. Potential factors that could
impact results include: the possibility that the expected
efficiencies and cost savings from the proposed transaction will
not be realized, or will not be realized within the expected time
period; the ability to obtain governmental approvals of the merger
on the proposed terms and schedule contemplated by the parties; the
failure of stockholders of Hewitt to approve the proposed merger;
the failure of the stockholders if Aon to approve the issuance of
Aon common stock to Hewitt stockholders; the risk that the Aon and
Hewitt businesses will not be integrated successfully; disruption
from the proposed transaction making it more difficult to maintain
business and operational relationships; the possibility that the
proposed transaction does not close, including, but not limited to,
due to the failure to satisfy the closing conditions; general
economic conditions in different countries in which Aon and Hewitt
do business around the world; changes in global equity and fixed
income markets that could affect the return on invested assets;
fluctuations in exchange and interest rates that could influence
revenue and expense; rating agency actions that could affect Aon's
ability to borrow funds; funding of Aon's various pension plans;
changes in the competitive environment; changes in commercial
property and casualty markets and commercial premium rates that
could impact revenues; the outcome of inquiries from regulators and
investigations related to compliance with the U.S. Foreign Corrupt
Practices Act and non-U.S. anti-corruption laws; the impact of
investigations brought by U.S. state attorneys general, U.S. state
insurance regulators, U.S. federal prosecutors, U.S. federal
regulators, and regulatory authorities in the U.K. and other
countries; the impact of class actions and individual lawsuits
including client class actions, securities class actions,
derivative actions and ERISA class actions; the cost of resolution
of other contingent liabilities and loss contingencies; and the
ability to realize the anticipated benefits to Aon of the Benfield
merger. Further information concerning Aon, Hewitt, and their
business, including factors that potentially could materially
affect Aon's and Hewitt's financial results, is contained in Aon's
and Hewitt's filings with the Securities and Exchange Commission
(the "SEC"). See Aon's and Hewitt's Annual Reports on Form
10-K and Annual Reports to Stockholders for the fiscal years ended
December 31, 2009 and September 30,
2009, respectively, and other public filings with the SEC
for a further discussion of these and other risks and uncertainties
applicable to our businesses. Neither Aon nor Hewitt undertakes,
and each of them expressly disclaims, any duty to update any
forward-looking statement whether as a result of new information,
future events or changes in their respective expectations, except
as required by law.
Additional Information
This communication does not constitute an offer to sell or the
solicitation of an offer to buy our securities or the solicitation
of any vote or approval. This communication is being made in
respect of the proposed transaction involving Aon and Hewitt.
In connection with the proposed transaction, Aon and Hewitt
will be filing documents with the SEC, including the filing by Aon
of a registration statement on Form S-4, and Aon and Hewitt intend
to mail a joint proxy statement regarding the proposed merger to
their respective stockholders that will also constitute a
prospectus of Aon. Before making any voting or investment decision,
investors and stockholders are urged to read carefully in their
entirety the joint proxy statement/prospectus regarding the
proposed transaction and any other relevant documents filed by
either Aon or Hewitt with the SEC when they become available
because they will contain important information about the proposed
transaction. You may obtain copies of all documents filed
with the SEC regarding this transaction, free of charge, at the
SEC's website (www.sec.gov), by accessing Aon's website at
www.aon.com under the heading "Investor Relations" and then
under the link "SEC Filings" and from Aon by directing a request to
Aon at Aon Corporation, 200 E. Randolph Street, Chicago, Illinois 60601, Attention: Investor
Relations, and by accessing Hewitt's website at
www.hewitt.com under the heading "Investor Relations" and
then under the link "Reports & SEC Filings" and from Hewitt by
directing a request to Hewitt at Hewitt Associates, Inc., 100 Half
Day Road, Lincolnshire, Illinois
60069, Attention: Investor Relations.
Aon and Hewitt and their respective directors and executive
officers and certain other members of management and employees may
be deemed to be participants in the solicitation of proxies in
respect of the proposed transaction. You can find information about
Aon's directors and executive officers in its definitive proxy
statement filed with the SEC on April 7, 2010. You can find
information about Hewitt's directors and executive officers in its
definitive proxy statement filed with the SEC on December 16, 2009. Other information regarding
the participants in the proxy solicitation and a description of
their direct and indirect interests, by security holdings or
otherwise, will be contained in the joint proxy
statement/prospectus and other relevant materials to be filed with
the SEC when they become available. You can obtain free copies of
these documents from Aon and Hewitt using the contact information
above.
Investor Contact:
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Media Contact:
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Scott Malchow
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David Prosperi
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Aon Corporation
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Aon Corporation
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Vice President, Investor
Relations
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Vice President, Global Public
Relations
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312-381-3983
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312-381-2485
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Investor Contact:
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Media Contact:
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Sean McHugh
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Maurissa Kanter
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Hewitt Associates
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Hewitt Associates
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Vice President, Investor
Relations
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Director, Public
Relations
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847-442-4176
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847-442-0952
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SOURCE Aon Corporation