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Aon and Willis Towers Watson abandoned a $30 billion partnership that will create the world’s largest insurance broker after the US government Prosecute Prevent the combination.
Aon’s chief executive, Greg Case, said on Monday that the two companies are in a “stalemate” with the U.S. Department of Justice, and the latter’s stance “ignores our complementary businesses operating in a broad and highly competitive economy.”
All-share trading, first Being hit In March 2020, as the coronavirus pandemic swept the world, this was the latest in the long-term consolidation of the insurance brokerage industry. Both Aon and Willis are listed in New York and after years of acquisitions, they have 95,000 employees and work in more than 100 countries.
However, in a lawsuit filed last month to block the transaction, the U.S. Department of Justice made severe criticisms. The lawsuit claims that this transaction will form “two giants” in the insurance brokerage field and will “eliminate fierce frontal competition, and may lead to price increases and reduced innovation, harming U.S. companies, their customers, employees, and retirees.”
As a result of the decision to abandon the merger, Aon will pay Willis a $1 billion breakup fee, which will be Announce It will strengthen its stock repurchase program by the same amount.
The U.S. Attorney General Merrick Garland said the news was “a victory for competition and American companies, and ultimately for their customers, employees and retirees across the country.”
He added: “Abandoning this anti-competitive merger decision will help maintain competition in the insurance brokerage industry.”
The chief executive of an underwriter of Lloyd’s of London said that the news would give the company and its insurance company a “great relief”, and they were worried that they would choose less because of this huge deal.
“Due to Greg Case’s record, it makes Aon slightly dented but very good,” the person said. “However, Willis looks like they need to make a deal.”
John Haley, CEO of Willis, stated that his company “is in a good position to actively compete in our global business and will continue to introduce important innovations to the market.”
At the time of the announcement, Aon, Willis and the US Department of Justice were ready to have a showdown in a US court.
A judge decided that the trial would start in November, two months later than Aon and Willis had hoped. This will drive the completion of the transaction beyond the target for the third quarter.
“If we lose [the case], We are in a hurting world,” Aon’s lawyer Tell Court.
Analysts warn that a protracted legal battle may force customers and employees to look elsewhere.
Another option is to conduct a deeper disposal in the United States, which may weaken the advantages of the merger: Aon has offered to sell its U.S. retirement business and Aon retiree health exchange business, but the U.S. Department of Justice stated that the proposed divestiture has not gone. Far enough.
By lunchtime in New York, Aon’s stock price had risen by more than 9%, while Willis’ stock price had fallen by a similar amount.
“The conclusion I have to draw is that the actual expected profitability of the business that Aon would have been able to maintain-assuming it reached an agreement with the U.S. Department of Justice-and the value of the distraction is less than paying $1 billion,” Bruyett Keef said & Woods analyst Meyer Shields (Meyer Shields). “[That] Surprised me. ”
In last week’s quarterly results, Marsh McLennan, the world’s largest insurance broker, stated that the departure of employees from two major competitors benefited the company due to “distraction and uncertainty” caused by the merger.
The decision to abandon the transaction was granted by the EU competition authority in the other major market of the two companies. Green light Earlier this month.
Aon and Willis have agree Sold $3.6 billion worth of assets to their rival Gallagher to smooth this aspect of the transaction. Due to the breakdown of the Aon Willis agreement, Gallagher said later on Monday that it would terminate the agreement and redeem the $650 million in debt raised for the transaction, while considering how to deploy excess cash-stock return. Buying is one of them. possibility.
Aon also announced on Monday that it would extend the employment agreement between Case and CFO Christa Davis for another three years.