The European Commission has approved the acquisition of Willis Towers Watson by Aon, lifting a major roadblock to the proposed $30 billion merger. But there are more roadblocks to overcome.
The approval is conditional on full compliance with a set of commitments offered by Aon, including the divestment of central parts of WTW’s business to the insurance broker Arthur J. Gallagher (AJG). Aon and WTW agreed in May to sell Willis Re and a set of Willis Towers Watson corporate risk and broking and health and benefits services to Gallagher for $3.57 billion — divestitures that aimed to settle a major part of the Commission’s antitrust concerns.
“The commitments will strengthen Gallagher in its capabilities in reinsurance and commercial risk brokerage and improve its footprint in the European Economic Area (EEA),” said the European Commission in a statement. “It will thus become a credible alternative to the combined entity post-transaction.” The EC first announced it was undertaking an antitrust review of the merger in December of last year.
“This is a major step that demonstrates continued progress toward obtaining regulatory clearances for the proposed combination,” responded the brokers in a joint statement. “Both firms operate across broad, competitive areas of the economy and believe this approval affirms that our proposed combination will accelerate innovation on behalf of clients, creating more choice in an already dynamic and competitive marketplace.”
In an equity research note, Wells Fargo Securities said it had been expected the European Commission would approve the deal during this time frame, “given the divestitures that have already been announced.”
Aon and Willis Towers Watson said they remain committed to the benefits of the combination and continue to work toward obtaining regulatory approval in all relevant jurisdictions. The combination remains subject to the receipt of required regulatory approvals and clearances, including United States antitrust laws.
Indeed, the United States still poses a major roadblock to the merger. In June, the U.S. Department of Justice filed a civil antitrust lawsuit against the merger, with the trial scheduled for November. This would delay the companies’ original expectation of closing the merger in the first half of 2021.
Wells Fargo Securities said the brokers have two options: to go to trial or to try to reach a settlement with the U.S. DOJ.
Other countries, such as Australia, South Africa and Singapore, are also examining the antitrust implications of the merger.
“We continue to believe all three (AJG, AON and Willis) present attractive investment opportunities right now (whether or not the deal gets done) as Aon and Willis have traded down since the U.S. DOJ filed its antitrust lawsuit,” said the Wells Fargo research note, which was authored by analysts Elyse Greenspan and James Kurek.
“For Gallagher, if the Aon/Willis deal is completed, they should see the accretion from the properties they have already bought and also will most likely need to buy additional properties in the U.S., which would bring on additional accretion,” the note explained.
“If the deal does not get done, Gallagher can buy back its shares with the proceeds from its recent equity offering (which is slated to be used to help fund its purchase of Willis assets),” the note continued.
“European companies rely on brokers to obtain best possible solutions to manage their commercial risk. Aon and Willis Towers Watson are leading players in the insurance and reinsurance brokerage markets,” commented Executive Vice-President Margrethe Vestager, who is in charge of competition policy at the European Commission.
“The remedy package accepted by the commission ensures that European companies, including insurance companies and large multinational customers, will continue to have a good choice and good services when selecting a broker suitable for their needs,” Vestager added.
To meet the antitrust demands of EU and U.S. competition authorities, Aon and WTW have initiated a group of disposals, including:
- 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 $1.4 billion.
- The sale of Aon’s pensions consulting, pension insurance broking, pensions administration and investment consulting business in Germany to Lane Clark & Peacock LLP (LCP).
- The sale of Willis Re and a set of Willis Towers Watson corporate risk and broking and health and benefits services to Arthur J. Gallagher for $3.57 billion.
*This story ran previously in our sister publication Insurance Journal.