Arthur J. Gallagher & Co. (AJG) has announced an agreement to acquire certain Willis Towers Watson (WTW) reinsurance, specialty and retail brokerage operations for US$3.57 billion (approx. £2.5 billion).
The deal, which is expected to close during the second half of 2021, was offered as part of a proposed regulatory remedy for the pending Aon and WTW mega-merger, which will create the world’s largest insurance broker.
The acquired operations include certain Willis Re treaty and facultative reinsurance brokerage operations, as well as some UK specialty, European and North American brokerage operations. Combined, these operations generated US$1.3 billion of estimated pro forma revenue and US$357 million of estimated pro forma EBITDAC, in each case for the year ended December 31, 2020.
“This acquisition will accelerate our long-term strategy by significantly expanding our global value proposition in reinsurance, broadening our retail brokerage footprint and strengthening key niches and specialty brokerage offerings,” said J. Patrick Gallagher, Jr., Chairman, President and CEO.
“The powerful combination of expertise, geographic reach and scale that this acquisition presents will greatly enhance our offerings to clients and prospects, while also providing significant value for our colleagues, carrier partners and shareholders. Most importantly, I look forward to welcoming more than 6,000 new colleagues to our growing Gallagher family of professionals.”
Gallagher has listed several expected benefits of the acquisition, including:
- Expanded global value proposition within reinsurance brokerage
- Broadened global footprint in retail property, casualty and health & benefits brokerage
- Increased depth in key niches and specialty operations such as energy, construction, cyber, space, and aerospace products
- A comprehensive suite of analytics capabilities including catastrophe modelling, dynamic financial analysis, rating agency analysis and capital modelling
- Stronger relationships with major insurance carriers and new relationships with middle market and large account retail clients
- Added platforms for future tuck-in acquisitions
The brokerage giant said it expects to finance the US$3.57 billion transaction using a combination of long-term debt, short-term borrowings, free cash and common equity. Integration of the new operations is expected to take around three years with total non-recurring integration costs estimated to be approximately US$350 million.