AON Agrees To Buy Willis Towers Watson

Tom Burroughes

10 March 2020

AON, the US-listed insurance and financial services group, has agreed to acquire risk management, brokerage and advisory business Willis Towers Watson in an all-stock deal. If completed, this adds to a number of specialist organisations in AON’s stable, such as the Scorpio Partnership wealth management consultancy bought half a decade ago.

The transaction has an implied $80 billion equity value, AON and Willis Towers Watson said in a statement yesterday.

The combined company will be named AON. Its operating headquarters will remain in London.

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. When the transaction is completed, existing AON shareholders will own about 63 per cent of the combined entity.

Yesterday’s statement did not refer to recent slides in equity markets and other highly volatile market behaviour as seen over the past week.

AON said that it expects to achieve annual “pre-tax synergies and other cost reductions” of $800 million by the third full year of combination.

"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," Willis Towers Watson chief executive John Haley said. AON’s chief executive, Greg Case, said: "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."

Haley will take on the role of executive chairman. Case will lead the firm, along with Christa Davies, AON’s chief financial officer.

The firms said the transaction is expected to generate more than $10 billion in shareholder value from the capitalised 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, taking account of $2.0 billion in expected one-time transaction, retention and integration costs.

The Scorpio Partnership business, founded by wealth management industry figure Sebastian Dovey, was sold in 2014 to Canada’s McLagan, a business owned by AON. The Willis Towers Watson deal suggests that AON is continuing to push out into new areas of expertise and revenue generation, such as risk management and advice.