Aon will pay a US$1 billion break fee to Willis Towers Watson (WTW) after a proposed marriage between the two global insurance broking and professional services firms fell over last week.
In a joint statement, Aon and WTW blamed the end of their 16-month engagement on a legal challenge from the US Department of Justice (DOJ).
Greg Case, Aon global chief, said in the release: “Despite regulatory momentum around the world, including the recent approval of our combination by the European Commission, we reached an impasse with the U.S. Department of Justice.
“The DOJ position overlooks that our complementary businesses operate across broad, competitive areas of the economy. We are confident that the combination would have accelerated our shared ability to innovate on behalf of clients, but the inability to secure an expedited resolution of the litigation brought us to this point.”
As reported in June this year, the DOJ spiked Aon’s mooted US$30 billion purchase of WTW with a law-suit claiming the takeover would create anti-competitive market conditions.
“As alleged in the complaint, Aon and Wills Towers Watson operate ‘in an oligopoly’ and ‘will have even more [leverage] when [the] Willis deal is closed’,” the DOJ release said at the time. “If permitted to merge, Aon and Willis Towers Watson could use their increased leverage to raise prices and reduce the quality of products relied on by thousands of American businesses — and their customers, employees, and retirees.”
Aon and WTW, respectively listed on the New York Stock Exchange and Nasdaq, launched merger talks in March 2020 at the start of the global coronavirus pandemic.
In the wake of the COVID-19 outbreak Aon instigated controversial plans to cut staff pay and contractor fees in emergency cost-saving measures it later rescinded.
According to a statement issued this June, the proposed merger was intended to “accelerate innovation on behalf of clients creating more choice in an already dynamic and competitive marketplace”.
The WTW scheme of arrangement to facilitate the takeover has now lapsed allowing both firms to “move forward independently,” the latest joint release says.
Following the break-up, the WTW board approved a US$1 billion top-up to its share buy-back program that already had US$500 million of outstanding share repurchase capital.
“Willis Towers Watson also expects to utilize the significant capital generated by cash flow from operating and non-operating activities to, among other things, increase its investment in organic and inorganic growth opportunities over the next three years,” the group said in a statement last week.
In NZ the two firms operate mainly in the reinsurance sector although Aon has an investment consulting business as well as a KiwiSaver scheme and small superannuation master trust. Auckland consultancy business, Melville Jessup Weaver (MJW) is also an “alliance partner” of WTW.
WTW has also carried out statutory assessments of both the NZ Superannuation Fund and the Government Superannuation Fund over the previous couple of years. Tim Mitchell, WTW global head of governance consulting, is now based in Wellington.
In July WTW also named Tracey Grant as NZ head of financial and executive risks. Currently based in Sydney, the ex-pat Kiwi was WTW head of healthcare practice Australasia. Prior to the recent COVID-19 lockdown in Sydney, Grant was slated to move to Auckland early in August.
Aon and WTW are both incorporated in Ireland and headquartered in London with respective annual revenues in 2020 of more than US$11 billion and US$9 billion.
Both firms were due to provide respective quarterly market updates on July 30 and August 3.