Sign up for myFT Daily Digest and be the first to learn about insurance news.
Aon and Willis Towers Watson have 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.”
The all-share transaction was first reached in March 2020, when the coronavirus pandemic swept the world and was the latest move in the long-term integration of the insurance brokerage industry.
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.
Willis CEO John Haley (John Haley) stated that his company “is well positioned to compete fiercely in our global business and will continue to introduce important innovations to the market.”
As Aon, Willis and the U.S. Department of Justice were preparing for a showdown in a U.S. court, this unexpected announcement was made.
A judge decided that the trial would start in November, which is two months later that Aon and Willis wanted. 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’s health exchange business for retirees, but the U.S. Department of Justice stated that the proposed divestiture has not Go far enough.
After the opening in New York, Aon’s share price rose strongly by 6%, while Willis’s share price fell by 5%.
In last week’s quarterly results, Marsh McLennan, the world’s largest insurance broker, said that it is benefiting from “distraction and uncertainty” surrounding its two main competitors.
Dan Glaser, the group’s chief executive, said that since the beginning of this year, nearly 2,000 employees have joined the company, most of them from its insurance brokerage division, which has taken employees away from Aon and Willis. .
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. But Gallagher’s disposal requires approval, including regulatory approval for the merger of Aon and Willis.
Aon also announced on Monday that it would extend the employment agreement between Case and CFO Christa Davis for another three years.