Jardine Lloyd Thompson Group plc (JLT), one of the world’s largest suppliers of insurance and employee benefits related advice, brokerage and services, will acquire the reinsurance brokerage business of global professional services firm Towers Watson for a cash consideration of $250 million, the companies announced Friday.
Towers Watson’s reinsurance brokerage business will be merged with JLT’s reinsurance business, JLT Re, to form a new entity with combined revenues of $266 million and 700 people in 35 locations in 17 countries.
The combined business will be branded for a transitional period as JLT Towers Re.
Towers Watson’s reinsurance brokerage business generated revenues of $166 million in the year ended June 2013, making it the fourth-largest reinsurance broker in the world. The business also generated a profit before tax of $26 million for the same period.
As part of the transaction, JLT Re and Towers Watson have entered into an Alliance Agreement that will ensure clients have continued access to Towers Watson’s risk consulting and software services. This agreement will also provide JLT Towers Re with continued use of Towers Watson’s proprietary actuarial models and software, alongside deep analytical and modeling capabilities that will be acquired with the business.
Upon formal completion of the transaction, Ross Howard, who is currently head of Towers Watson’s reinsurance brokerage business, will become executive chairman of the merged operation, while JLT Re CEO Alastair Speare-Cole will become CEO of the enlarged business. Alan Griffin will step down as chairman of JLT Re but will retain a board and advisory role.
The acquisition is subject to regulatory approvals and is expected to be completed before the year’s end. The two businesses will be fully integrated over the course of 2014 and 2015.
Total transaction and integration costs are expected to be approximately $7 million and $20 million, respectively. The acquisition, which will be made on a debt and cash free basis and financed from JLT’s cash resources and debt, is expected to be earnings accretive in the first full year following completion. The gross assets being acquired amount to approximately $106 million.
Source: Jardine Lloyd Thompson Group and Towers Watson