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The Insurer In Full: Divestments close in Aon-WTW end game

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    • Mergers & Acquisitions
    • Strategy

It is likely Arthur J Gallagher will find itself as the owner of Willis Re and various assets of Willis Towers Watson’s Corporate Risk & Broking business...

The Pat Gallagher-led broker has emerged at the front of the queue to buy the divested businesses after a sudden pick-up in momentum in the last week that appears to have put the finish line in sight for the overarching deal.

This publication revealed on Monday that suitors for the assets being put on the block as part of remedy packages have been making their case to regulators on both sides of the Atlantic in the last week.

And while there is understood to have been participation from Howden and McGill and Partners in the process, Gallagher is expected to emerge as the acquirer of the majority of the business being divested after being in the driving seat right from the off.

The biggest asset on the table is Willis Re and the facultative business housed in WTW’s insurance brokerage operations.

With Willis Re executives understood to have signed up to new long-term deals in recent weeks, locking them in post-sale, there is confidence that a transaction could be agreed and executed at a rapid pace.

The new contracts are likely to minimize the flight risk under TUPE legislation in the UK.

With talks between suitors of the WTW assets and regulators in train, it then emerged on Wednesday that European Commission (EC) antitrust regulators are expected to give conditional clearance to the $30bn deal without further remedies.

That suggested that concessions offered to the EC have met with the regulator’s approval, representing a major step forward in getting the deal over the line.

Other parts of the WTW business being divested to allay EC competition concerns include its Corporate Risk & Broking (CRB) units in France, Germany, Spain and Netherlands as well as parts of the CRB finpro and cyber operations and aerospace manufacturing/space.

Earnings call signals

Although the various parties have remained relatively tight-lipped on their respective earnings calls this week, there were signals that things are moving towards an end game that fits with the original schedule to close the deal by 30 June at the latest.

On Gallagher’s call with analysts last night, chairman, president and CEO Pat Gallagher said: “In terms of what comes out of the Aon and Willis opportunity, we read the same things that you’re reading, and we just typically don’t comment on acquisitions that we hear about in the papers.”

He instead confirmed that the broker currently has up to $2.5bn worth of M&A capacity this year, adding that it continues to like its tuck-in merger strategy, with 40 deal term sheets in the work.

But he did respond to a question about the rapidly concluded JLT aerospace acquisition that came out of the Marsh McLennan transaction and whether Gallagher might be sacrificing due diligence in any move for assets in the Aon-WTW fallout because of timeline issues to get the overarching deal done.

“We did the aerospace deal in London in pretty short order. We’re really happy with that acquisition. It turned out to be terrific. We didn’t seem to sacrifice anything,” the executive commented.

Aon-WTW planned divestments

If that is an indicator of confidence in being able to get a deal done fast – broker acquisitions in the public space are after all a very different animal than complex carrier acquisitions – then there were also signals in Aon and WTW calls this week of confidence in the process.

WTW CEO John Haley said the Aon transaction is still expected to close in the first half of 2021, subject to regulatory approval as he also downplayed the impact of personnel departures in segments of the firm’s Corporate Risk & Broking business.

And then this morning there was further commentary from Aon about the state of the deal.

CFO Christa Davies said that the firm is continuing to work collaboratively with regulators to gain approvals, and confirmed publicly that remedies have been offered as part of that process.

Although she would not disclose further details on the remedies, the executive also revealed that Aon still expects to deliver the $800mn of cost synergies projected when the deal was announced last March, even after taking into account divestments.

She and Aon CEO Greg Case also reaffirmed the commitment to the transaction and completing it within the first half of 2021.

Almost 14 months after the Aon-WTW transaction was announced – and for the most part under the shadow of the global pandemic – the finishing line finally looks to be in sight.


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