Update: Aon and Willis Terminate $30B Merger; Aon to Pay $1B Break-up Fee

By | July 26, 2021

Aon plc and Willis Towers Watson announced that the firms have agreed to terminate their $30 billion business combination agreement and end litigation with the U.S. Department of Justice (DOJ).

The proposed combination was first announced on March 9, 2020 and would have created the largest insurance broker.

Aon-WTW Merger Would Help Boost Industry’s Innovation. Aon CEO Makes the Case.

In connection with the termination of the business combination agreement, Aon will pay a $1 billion termination fee to Willis Towers Watson, Willis Towers Watson’s proposed scheme of arrangement has now lapsed, and both organizations will move forward independently.

“Despite regulatory momentum around the world, including the recent approval of our combination by the European Commission, we reached an impasse with the U.S. Department of Justice,” said Aon CEO Greg Case, in a prepared statement. (Case’s employment agreement has been extended to April 1, 2026.)

“The DOJ position overlooks that our complementary businesses operate across broad, competitive areas of the economy. We are confident that the combination would have accelerated our shared ability to innovate on behalf of clients, but the inability to secure an expedited resolution of the litigation brought us to this point,” Case added.

Read more: U.S. AG Garland Hails Aon-Willis Merger Termination as a ‘Victory for Competition’

Although the companies received approval from the European Union to go ahead with the merger, the U.S. DoJ filed a lawsuit last month to block the combination on antitrust grounds. And other countries were also examining the implications of the merger, such as Canada, Australia and New Zealand.

To meet the concerns of antitrust watchdogs, the brokers had agreed to divest certain of their holdings but not if the merger failed to be completed. Indeed, both Aon and WTW had previously said that “all of the announced regulatory divestitures are contingent on the completion of the pending Aon and Willis Towers Watson combination, as well as other customary closing conditions.”

In May, both companies agreed to sell off Willis Re and other WTW assets to Arthur J. Gallagher & Co. for nearly $3.6 billion. Other planned divestitures included the sale of Aon’s U.S. retirement business to private investment firm Aquiline and its Retiree Health Exchange individual health insurance business to Illinois-based digital services firm Alight for total gross consideration of $1.4 billion. In addition, Aon agreed in May to sell its retirement and investment business in Germany.

Read more: Arthur J. Gallagher Ends $3.6B Deal to Buy Willis Re, After Aon-Willis Merger Scrapped

“Our team’s resilience and commitment are a source of pride and confidence. They have continued to bring to life Willis Towers Watson’s compelling value proposition to better serve our clients in the areas of people, risk and capital,” said Willis Towers Watson CEO John Haley.

“Going forward, our focus remains steadfast on our colleagues, our clients and our shareholders. We believe we are well-positioned to compete vigorously across our businesses around the world and will continue to introduce important innovations to the market. We appreciate and deeply respect all the Aon colleagues we got to know through this process,” Haley added.

Both firms will provide further financial updates and outlooks on their respective second quarter earnings calls, which take place on July 30 for Aon and Aug. 3 for Willis Towers Watson.

In a separate announcement, Willis Towers Watson announced that its board of directors approved an increase of $1 billion to its existing share repurchase program, which has approximately $500 million remaining on the current open-ended repurchase authority.

WTW said it is “authorized to repurchase shares, by way of redemption, and will consider whether to do so from time to time, based on many factors, including market and economic conditions, applicable legal requirements and other business considerations.”

WTW anticipates using this authorization in 2021 and 2022.

Willis Towers Watson also “expects to utilize the significant capital generated by cash flow from operating and non-operating activities to, among other things, increase its investment in organic and inorganic growth opportunities over the next three years.”

There was no mention in the press release about whether the share repurchase plan has a connection to the termination announcement and the $1 billion fee that WTW will receive from Aon.

In yet another announcement, Aon announced it had extended employment agreements for CEO Case and Aon CFO Christa Davies for an additional three years, through April 1, 2026.

“The biggest question when Willis reports earnings is its plan for CEO succession as John Haley was expected to retire when the deal with Aon closed,” said an equity research note from Wells Fargo.

Topics Mergers Trends Aon

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