Update: Aon Confirms EU Antitrust Probe of Merger with Willis Towers Watson

Aon plc confirmed that the European Commission (EC) has initiated a review of the company’s proposed $30 billion bid for Willis Towers Watson.

Aon said the Phase II review is a common next step “for a transaction of this size and complexity under EU Merger Regulation…” However, the broker said it remains on track to close the deal in the first half of 2021.

“As stated previously, Aon’s and Willis Towers Watson’s businesses are complementary, operating across broad, very competitive areas of the economy, and Aon remains confident of a positive outcome without any divestitures,” said Aon in a statement.

“Aon expected a thorough review of this combination and will continue to work closely with all the relevant regulators, including the EC. The firm looks forward to continuing its dialogue with the EC throughout the Phase II review process.”

“We have opened an in-depth investigation to assess carefully whether the transaction could lead to negative effects for competition, less choice and higher prices for European customers in the commercial risk brokerage market,” said EC Executive Vice-President Margrethe Vestager, who is responsible for competition policy, in a statement.

A full-scale EC investigation will take about three months until May 10, 2021, according to the EC. Reuters first reported the likely EU investigation last week.

The EC said it is concerned that the proposed deal could affect competition with regards to:

• Brokerage services to large multi-national customers in the risk classes property/casualty, financial and professional services, credit and political risk, cyber and marine;
• Brokerage services to customers of all sizes for space and aerospace manufacturing risks as well as in a few additional risk classes in specific national markets.
• The provision of reinsurance brokerage services. “The transaction would combine two of the three leading reinsurance brokers and thereby may reduce choice for insurance companies placing their risks with reinsurance companies…,” said the EC.

Divestitures Expected

According to equity research issued by Wells Fargo Securities, there are likely to be some divestitures to facilititate regulatory approval of the Aon-WTW merger.

“If Aon did have to sell businesses, we would expect there could be many potential buyers depending on what ultimately might have to be sold,” said Wells Fargo Securities, pointing to Arthur J. Gallagher as a possible contender for Willis Re.

“Even with some divestitures, we still view the deal favorably and think Aon and Willis should more than exceed the expense saves laid out with the deal,” said the research note. “From a fundamental perspective, Aon should benefit from the economy improving to pre-COVID-19 levels right around when the Willis transaction is expected to close….”

The EC said the opening of an in-depth inquiry does not prejudge the final result of the investigation.

Source: Aon