Aon plc to combine with Willis Towers Watson in all-stock transaction
Aon plc (AON) and Willis Towers Watson (WLTW) announced a definitive agreement to combine in an all-stock transaction with an implied combined equity value of approximately $80B.
The combined company, to be named Aon, will be “the premier, technology-enabled global professional services firm focused on the areas of risk, retirement and health,” the companies stated.
Aon will maintain operating headquarters in London, United Kingdom. John Haley will take on the role of Executive Chairman with a focus on growth and innovation strategy.
The combined firm will be led by Greg Case and Aon Chief Financial Officer Christa Davies.
Under the terms of the agreement unanimously approved by the Boards of Directors of both companies, each Willis Towers Watson shareholder will receive 1.08 Aon ordinary shares for each Willis Towers Watson ordinary share, and Aon shareholders will continue to own the same number of ordinary shares in the combined company as they do immediately prior to the closing.
Upon completion of the combination, existing Aon shareholders will own approximately 63% and existing Willis Towers Watson shareholders will own approximately 37% of the combined company on a fully diluted basis.
Aon anticipates that the transaction will provide annual pre-tax synergies and other cost reductions of $800M by the third full year of combination, thereby allowing the firm to continue significant investment in innovation and growth. Potential revenue synergies due to complementary capabilities are expected but not included in the synergy estimates.
The transaction is expected to be accretive to Aon adjusted EPS in the first full year of the combination with peak adjusted EPS accretion in the high teens after full realization of $800M of pre-tax synergies.
Willis Towers Watson and Aon anticipate savings of $267M in the first full year of the combination, reaching $600M in the second full year, with the full $800M achieved in the third full year.
Free cash flow accretion is expected to breakeven in the second full year of the combination with free cash flow accretion of more than 10% after full realization of synergies.
The transaction is expected to generate over $10B of shareholder value creation from the capitalized value of the expected pre-tax synergies, based on the blended 2020 price to earnings ratio of Willis Towers Watson and Aon UK on 6 March 2020, net of $2.0B in one-time transaction, retention and integration costs.
WTLW last traded at $193.13. AON last traded at $192.15.
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