Aon, Willis to merge, forming biggest broker globally

Aon this week revisited last year’s plans to buy out Willis Towers Watson Plc in what is the world’s biggest insurance merger. The number two and number three market leading global insurance brokers have agreed to join forces in an all-stock deal with an implied combined equity value of about $US80bn ($A121.6bn).

The merged entity will overtake Marsh & McLennan Companies Inc as the biggest insurance broker globally. According to Reuters, Aon will buy Willis for almost $US30bn, giving it more pricing power, but also attract regulatory scrutiny.

Willis said in a media statement, the combined company, to be named Aon, would be the premier, technology-enabled global professional services firm focused on risk, retirement and health.

Under the deal, unanimously approved by both boards, each Willis shareholder will receive 1.08 Aon ordinary shares for each Willis ordinary share. On completion of the merger, existing Aon shareholders will own about 63% and existing Willis shareholders will own about 37% of the combined entity.

The deal is expected to add to Aon’s adjusted earnings per share in the first full year, with full savings of $US800m achieved in the third year.

The two brokers’ combined platform in 2019, generated significant revenue of about $US20bn and free cash flow of $US2.4bn. The combined firm was expected to be “well-positioned to immediately deliver mid-single digit organic revenue growth or greater and, over the long term, double-digit free cash flow growth”.

Willis CEO John Haley said: “This transaction (provides) our combined teams the opportunity to drive innovation more quickly and deliver more value.

Aon CEO Greg Case said the pair’s “world-class expertise” across risk, retirement and health would accelerate the creation of new solutions that more efficiently matched capital with unmet client needs in high-growth areas, eg cyber, delegated investments, intellectual property, climate risk and health solutions.

Willis said Aon would maintain operating headquarters in London and Haley would take on the role of executive chair with a focus on growth and innovation strategy.

The combined firm would be led by Case and Aon CFO Christa Davies “along with a highly experienced and proven leadership team that reflects the complementary strengths and capabilities of both organisations”. The board would comprise proportional members from Aon and Willis’s current directors.

The transaction was subject to the approval of the Aon Ireland and Willis shareholders plus other customary closing conditions, including required regulatory approvals. Subject to satisfaction of those conditions, the parties expected the transaction to close in the first half of 2021.