Willis Towers to Sell Reinsurance Unit After Failed Aon Deal

(Bloomberg) -- Willis Towers Watson Plc agreed to sell its global reinsurance business to Arthur J. Gallagher & Co. for $3.25 billion in cash, weeks after its planned $30 billion takeover by Aon Plc fell apart.

“Following the termination of the proposed combination with Aon, we have been taking time to reflect on what we have learned about WTW over the last 16 months and determine how we will move forward,” Chief Executive Officer John Haley said in a statement Friday. “We concluded that divestment was the appropriate path for this business and for WTW.”

Aon canceled its takeover of Willis Towers last month, after failing to convince U.S. officials that the combination wouldn’t hurt competition in the industry. Gallagher agreed in May to acquire a larger slate of businesses from Willis as part of measures proposed to address regulatory concerns, but canceled that deal late last month.

Willis Re’s treaty reinsurance brokerage generated $745 million of estimated revenue in 2020. The business operates in 24 countries and places more than $10 billion of premiums annually, according to a separate statement from Gallagher. The acquisition gives Gallagher capabilities in actuarial services, catastrophe modeling, rating-company analysis and capital modeling, the company said.

“Broadening our reinsurance brokerage offerings has been a strategic objective at Gallagher,” Chief Executive Officer J. Patrick Gallagher Jr. said in the statement.

The deal, which is expected to be completed in the fourth quarter, includes the potential for an additional $750 million in cash subject to certain revenue targets, according to the Willis Towers statement.

The transaction “a good deal for both parties,” Wells Fargo & Co. insurance analyst Elyse Greenspan said in a note to clients Friday.

“Gallagher gets the reinsurance scale they would not have had on their own,” making it among the top three reinsurance brokerages globally, she wrote. “Willis gets a good enough price (and ability to receive more proceeds down the road) and can use the cash received to buy back more of its shares.”

Willis Towers shares rose 0.2% to $221.67 at 9:35 a.m. in New York. Gallagher gained 0.3% to $141.94.

©2021 Bloomberg L.P.