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It has been announced that Aon plc and Willis Towers Watson have reached a definitive agreement to combine in an all-stock transaction with an implied combined equity value of approximately $80bn.

 

 

Transaction Details

Under the terms of the agreement unanimously approved by the Boards of Directors of both companies, each Willis Towers Watson shareholder will receive 1.08 Aon ordinary shares for each Willis Towers Watson ordinary share, and Aon shareholders will continue to own the same number of ordinary shares in the combined company as they do immediately prior to the closing. Upon completion of the combination, existing Aon shareholders will own approximately 63% and existing Willis Towers Watson shareholders will own approximately 37% of the combined company on a fully diluted basis.

 

Leadership Comment

Willis Towers Watson CEO John Haley commented:

“The combination of Willis Towers Watson and Aon is a natural next step in our journey to better serve our clients in the areas of people, risk and capital…This transaction accelerates that journey by providing our combined teams the opportunity to drive innovation more quickly and deliver more value.”

Aon CEO Greg Case commented:

“This combination will create a more innovative platform capable of delivering better outcomes for all stakeholders, including clients, colleagues, partners and investors…Our world-class expertise across risk, retirement and health will accelerate the creation of new solutions that more efficiently match capital with unmet client needs in high-growth areas like cyber, delegated investments, intellectual property, climate risk and health solutions.”

 

Click here to read the press release in full.

 

Alpha comment: this news follows several months of speculation and gives Willis Towers Watson an implied valuation of $30bn, a c. 16% premium on its closing stock market price last week. Should the merger proceed as outlined, it would dwarf the $5.6bn Marsh paid to acquire JLT in April 2019 and create the world’s largest broking firm (having stood as #2 and #3, respectively).

We await further details with interest. It is very possible that competition commission rules may prevent some Willis Towers Watson divisions being included in the merger. The recent example of JLT aerospace being sold to AJ Gallagher prior to the Marsh merger receiving regulatory approval would suggest some trading units may be housed elsewhere. Included in this could be Miller, following media reports last month that the formerly independent London market wholesale broker, in which Willis bought a controlling share in 2015, was being put up for sale. 

Regardless, the merger of Aon and Willis Towers Watson will mark the largest-ever broker consolidation, with far-reaching consequences for the Lloyd’s market. Unlike the merger of Willis and Towers Watson in 2015 (with a combined equity value of c. $30bn), both Willis Towers Watson and Aon possess a significant market share of Lloyd’s broking revenues.