Chicago-based Aon Corporation and UK-based broker Benfield Group Limited announced that their respective boards of directors have reached agreement for Aon to acquire Benfield for £3.50 ($6.55) per share in cash and assume £91 million ($170 million) of Benfield net debt, representing an enterprise value of approximately £935 million ($1.75 billion) on a fully diluted basis.
“The consideration represents a 29 percent premium to Benfield’s closing stock price on August 21, 2008, the last trading day prior to the announcement of the agreement,” said Aon’s bulletin.
Benfield is a leading independent reinsurance intermediary. The company took its present form in 2001, when UK-broker Benfield Greig acquired Dallas-based E.W. Blanch Holdings [See IJ web site – https://www.insurancejournal.com/magazines/southcentral/2001/05/14/features/18667.htm]. Renamed “Benfield,” it is generally ranked as the third largest reinsurance broker. Aon said it “intends to integrate the Benfield business with its existing reinsurance operations (Aon Re Global) and operate the division globally under the newly created Aon Benfield Re brand.”
“This agreement reflects our ongoing efforts to ensure that Aon’s colleagues, capabilities and technology remain at the forefront of our industry and that we provide the best value for our clients,” stated Aon’s President and CEO Greg Case.
He added that, “Aon and Benfield share a common focus on excellence in client service, and both recognize the importance of being the destination of choice for the best talent in our industry. The strong cultural fit between our firms will enable us to quickly realize the benefits of this transaction, and the value added for our clients and shareholders, in a seamless fashion following the close of our transaction.”
Grahame Chilton, Benfield’s CEO will become vice chairman of Aon Group, reporting to Case. Chilton stated: “We are excited by this unique opportunity to create a powerful global franchise capable of expanding and redefining innovative reinsurance and capital market solutions. At the same time, the Benfield board believes that the offer provides Benfield’s shareholders with fair and certain value. We look forward to joining the Aon team and working with them as Aon Benfield Re to expand our joint expertise and local reach to customers around the world.”
In further notes to the bulletin announcing the transaction, Aon said the two companies “reinsurance operations are highly complementary,” and that both firms have been targeting “developing markets around the world,…including Asia, Central and Eastern Europe, Africa and Latin America.”
In terms of cost savings, Aon said “the transaction is expected to generate approximately £65 million ($122 million) in annual cost savings fully phased-in in 2011, primarily from shared administrative and support services across both Aon Re Global and Benfield.”
The transaction is expected to close by the end of 2008, subject to customary closing conditions and regulatory approvals as well as approval by Benfield shareholders.
Aon said it has “received commitments from Benfield shareholders representing approximately 25.4 percent of Benfield’s outstanding shares to vote their shares in favor of the transaction. Aon intends to fund the transaction through cash on hand. The transaction is not subject to a financing contingency.
For those who missed the “Newswire Conference Call” at 8:00 a.m. in London and 3:00 a.m. in New York, Aon and Benfield will host a conference call today, Friday, August 22, 2008, at 8:30 a.m. (New York), 7:30 a.m. (Chicago), 1:30 p.m. (London). Interested parties can listen to the conference call by dialing +1- (888) 423-3275 (within the U.S.) or +1- (612) 332-0820 (outside of the U.S), or via a live audio web cast at: www.aon.com and www.benfieldgroup.com.
A replay of the conference call will be available through September 5, 2008, and can be accessed by dialing +1- (800) 475-6701 (within the U.S.) or (320) 365-3844 (outside of the U.S.), access code: 958397. The replay will also be available on both companies web sites.
Source: Aon Corp.