Willis-Gallagher re-enter multi-billion-dollar acquisition deal

Global multinational re/insurance broker  Willis Towers Watson will be split-up with its reinsurance operations being sold to  Arthur J Gallagher in a  renewed deal now valuing the business at $4 billion.

Just two weeks after terminating its $3.57 billion deal with WTW, Gallagher has again agreed to purchase Willis Re - but this time for an initial gross consideration of $3.25 billion, and potential additional consideration of $750 million subject to certain third-year revenue targets.

The two broking giants had initially reached a similar agreement in May, contingent on the Aon- Willis merger clearing. The deal was called off as a result of Aon and WTW terminating their proposed $30 billion merger after they "reached an impasse" with the US Department of Justice.

Both companies announced today (August 13) that they have re-entered into an agreement that will see Gallagher acquire Willis Re from Willis Towers Watson.

The new transaction is expected to close during the fourth quarter of 2021, subject to the receipt of required regulatory approvals and clearances, as well as other customary closing conditions and consultation.

The operations include all of Willis Re’s treaty reinsurance brokerage operations, which for the year ended December 31, 2020 generated $745 million of estimated pro forma revenue and $265 million of estimated pro forma EBITDAC.

Gallagher intends to finance the transaction using cash on hand, including the $1.4 billion of net cash raised via its May 17, 2021 follow-on common stock offering and the $850 million of net cash borrowed via its May 20, 2021 30-year senior note issuance, short-term borrowings and additional free cash generated before close.

The broker noted that the integration is expected to take approximately three years with total non-recurring integration costs estimated to be approximately $250 million.

Patrick Gallagher, Jr. (pictured left), chairman, president and CEO, said: “Broadening our reinsurance brokerage offerings has been a strategic objective at Gallagher and this acquisition will significantly enhance our global value proposition. We were very impressed with the Willis Towers Watson reinsurance professionals we met during our initial due diligence and strongly believe a combination will significantly enhance our offerings to clients and prospects. I look forward to welcoming the 2,200 new colleagues joining us as part of this transaction to our growing Gallagher family of professionals.”

John Haley (pictured right), CEO of Willis Towers Watson, said: “Following the termination of the proposed combination with Aon, we have been taking time to reflect on what we have learned about WTW over the last 16 months and determine how we will move forward as an independent company. As part of this, we conducted a review of strategic alternatives for Willis Re, our global reinsurance business. While we highly value Willis Re and our colleagues who contribute to its success, we concluded that divestment was the appropriate path for this business and for WTW.

He added: "We are excited about our go forward portfolio of businesses and believe we are well positioned to compete vigorously around the world and make investments to grow organically and inorganically. We are winning new business, bringing the best to our clients and actively engaging and recruiting talent. And, we are going to continue to innovate and adapt to address evolving client needs. We look forward to sharing more about our future plans during our upcoming Investor Day on September 9.”

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