Aon Swoop for WTW in $30 billion deal

Aon has swooped for rival Willis Towers Watson after a year of on-off discussion which will combine the world’s second and third largest broking operations.

The news was announced in the US this morning and will see current Aon CEO Greg Case run the combined operation in an all stock deal that will see WTW shareholders receive 1.08 Aon shares for each of their current WTW shares. It will leave current AON shareholders owning 63% of the combined company.

It comes a year after Aon was forced to reveal it had been in talks with its rival but they failed to reach an agreement. At the time Aon reserved the right within 12 months to set aside its announcement that it wasn’t intending to pursue a deal. Under the regulations it precluded Aon from contacting WTW for at least 12 months but there were no such restrictions on WTW contacting Aon.

Aon issued a statement which said the definitive agreement had been agreed and the deal would have an implied combined equity value of approximately $80 billion.

“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,” said Willis Towers Watson CEO John Haley. “This transaction accelerates that journey by providing our combined teams the opportunity to drive innovation more quickly and deliver more value.”

“This combination will create a more innovative platform capable of delivering better outcomes for all stakeholders, including clients, colleagues, partners and investors,” said Aon CEO Greg Case. “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.”

The two companies said the deal delivered a range of benefits.

“It Combines two highly complementary businesses into a technology-enabled global platform that is more relevant and responsive to client needs. The transaction unites firms that share a belief in the power of data-driven insights to create new sources of client value.

They said it will also provide the opportunity to expand and further accelerate execution against the existing Aon United and Willis Towers Watson growth strategies.

“The new firm will have an established focus on client value and its combined management teams have considerable experience with the integration of large, complex transactions. The teams have a shared appreciation for the importance of colleague development, the effectiveness of a one-firm growth strategy and the value of its application to the combined enterprise,” it added. “The transaction is expected to generate more than $10 billion in shareholder value creation from the capitalized value of expected pre-tax synergies, based on the blended 2020 price to earnings ratio of Willis Towers Watson and Aon UK on 6 March 2020, net of $2.0 billion in expected one-time transaction, retention and integration costs.

The combined company, is be named Aon, and will maintain operating headquarters in London.

“John Haley will take on the role of Executive Chairman with a focus on growth and innovation strategy. The combined firm will be led by Greg Case and Aon Chief Financial Officer Christa Davies, along with a highly experienced and proven leadership team that reflects the complementary strengths and capabilities of both organizations,” said the statement. “The Board of Directors will comprise proportional members from Aon and Willis Towers Watson’s current directors.”

Aon said it anticipates that the transaction will provide annual pre-tax synergies and other cost reductions of $800 million by the third full year of combination, thereby allowing the firm to continue significant investment in innovation and growth.