DOW JONES NEWSWIRES
Insurance broker Aon Corp. (AON) has agreed to buy
human-resource consulting and outsourcing company Hewitt Associates
Inc. (HEW) in a cash-and-stock deal valued at about $4.9
billion.
The deal will nearly triple the size of the Aon's consulting
operations, making it a $4.3 billion business by revenue. Aon
Hewitt, as the consulting and outsourcing operations will be known,
will be run by Hewitt Chairman and Chief Executive Russ Fradin.
The deal values Hewitt at $50 a share--a 41% premium over
Friday's closing price. Holders will be able to elect all cash or
stock, but $2.45 billion of cash will be paid for Hewitt, with
stock making up the rest. Unless otherwise requested, holders would
get $25.61 and 0.6362 share of Aon stock for each share of
Hewitt.
The deal, expected to close by mid-November, would cut into
Aon's profit next year, but boost them slightly absent
restruturing-related charges. Profits on both basis are projected
to increase at Aon starting in 2012 as a result of the
acquisition.
The companies expect the deal to save about $355 million
annually by 2013, mostly from reduction in back-office areas and
other impacts.
Hewitt has some 3,000 clients, and 49% of Aon Hewitt's operation
by revenue would be consulting. Another 40% would be benefits
outsourcing.
In April, Aon said its first-quarter earnings dropped 36% after
$126 million in year-earlier tax gains, though its adjusted
earnings rose and topped analysts' forecasts. Meanwhile, Hewitt in
May said its fiscal second-quarter earnings fell 15% on charges and
a year-earlier gains as revenue increased and adjusted results
rose.
Shares of Aon and Hewitt closed at $38.34 and $35.40,
respectively, on Friday and were inactive premarket. The stocks
have risen 4.5% and 25%, respectively, in the past year.
-By Nathan Becker, Dow Jones Newswires; 212-416-2855;
nathan.becker@dowjones.com