Gallagher to buy Willis Re, other WTW units
The divestments, which total more than $3.5 billion, are being made to move the Aon-WTW merger forward.
In an effort to appease regulators’ competition concerns for the proposed merger with Aon, Willis Tower Watson (WTW) has agreed to sell Willis Re and other divisions to Arthur J. Gallagher Co. in a deal that is valued at $3.57 billion, according to the purchasing company.
The closing of this transaction is contingent on the completion of the Aon/WTW merger and other closing conditions, Aon reported.
“This agreement demonstrates strong momentum on the path to close our proposed combination with Willis Towers Watson,” Greg Case, Aon CEO, said in a release. “We’ve used this time to align our future leadership team around a one-firm culture that will create new opportunities for colleagues, accelerate innovation on behalf of clients and deliver shareholders the long-term value creation they have come to expect from our team.”
In addition to Willis Re and cedent facultative reinsurance operations, excluding mainland China and Hong Kong, the Gallagher transaction would also include corporate risk and broking business units covering:
- Aerospace manufacturers insured through Inspace.
- Property & casualty and Finex insurance in the European Economic Area, U.K., U.S., Brazil and Hong Kong relating to certain large multinational companies headquartered in France, Germany, the Netherlands and Spain.
- Finex accounts relating to certain large multinational companies headquartered in the U.K.
- Services in certain countries in Europe (France, Germany, the Netherlands and Spain), excluding Affinity; Bermuda; cyber in the U.K.; and certain accounts in the Houston and San Francisco offices in the U.S.
“We announced this combination knowing that the complementary capabilities of our two firms would allow us to deliver more value to clients and opportunities for colleagues. The events of the last year have only reinforced that rationale, and this announcement is an important step toward realizing that potential,” John Haley, Willis Towers Watson CEO, said in a release. “We appreciate the extraordinary value these colleagues have delivered to our clients and our company. We are confident they have a bright future at Gallagher.”
After news of the deal broke, S&P Global Ratings revised its outlook for Gallagher from stable to positive.
“We believe AJG (Gallagher) benefits from a well-established domestic and international market presence, along with meaningful scale, scope, and diversity across various subsectors that position it above most direct middle-market competitors,” S&P Global stated in a release. “While the company has been growing its international operations and risk management capabilities, it currently has a high concentration in the highly fragmented North American middle-market brokerage sector relative to peers, which include brokers with a more diversified and robust global market presence. We currently assess AJG’s competitive position at the upper range of satisfactory and believe a more well-established and diversified international presence relative to higher-rated peers could lead to a stronger competitive position over time.”
After the transaction closes
If the deal is finalized, Gallagher anticipates integration of the new divisions to take around three years and cost approximately $350 million.
“This acquisition will accelerate our long-term strategy by significantly expanding our global value proposition in reinsurance, broadening our retail brokerage footprint and strengthening key niches and specialty brokerage offerings,” J. Patrick Gallagher, Jr., Gallagher chairman, president and CEO, said in a release. “The powerful combination of expertise, geographic reach and scale that this acquisition presents will greatly enhance our offerings to clients and prospects while also providing significant value for our colleagues, carrier partners and shareholders. Most importantly, I look forward to welcoming more than 6,000 new colleagues to our growing Gallagher family of professionals.”
Aon reported work continues to ease all regulatory concerns for its proposed WTW merger. This includes apprehensions at the U.S. Department of Justice, which is conducting its own review of the proposed merger.
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