Aon, Willis cancel $30 billion deal amid DOJ impasse

Aon, Willis cancel $30 billion deal amid DOJ impasse
The insurance brokerage, which couldn't convince the U.S. that the combination wouldn't restrain competition, will pay a $1 billion termination fee to Willis Towers.
JUL 26, 2021

Aon canceled its planned $30 billion takeover of Willis Towers Watson after failing to convince U.S. officials that the combination, which would have created the world’s biggest insurance brokerage, wouldn’t hurt competition.

Aon will pay a $1 billion termination fee to Willis Towers, the companies said Monday in a statement. Willis Towers said separately that it had approved a $1 billion increase to its share repurchase program.

The Justice Department sued to block the acquisition in June, saying the deal was anti-competitive. Mega-mergers are getting more difficult after the Biden administration earlier this month vowed to more heavily scrutinize the consolidation trend. A surge in mergers and acquisitions was just restarting in the U.S. after largely being on pause during the height of the Covid-19 pandemic.

“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,” Aon Chief Executive Greg Case said in the statement. “The inability to secure an expedited resolution of the litigation brought us to this point.”

Case said in a video sent to employees that the litigation with the Justice Department would have stretched well into next year, making a speedy resolution impossible.

Attorney General Merrick Garland praised the move in a statement.

“This is a victory for competition and for American businesses, and ultimately, for their customers, employees and retirees across the country,” Garland said. “The decision to abandon this anticompetitive merger will help preserve competition in insurance brokering.”

Aon shares surged 10% at 1 p.m. in New York, the biggest intraday gain in more than a year. Willis Towers fell 7.8%.

BROKER RANKINGS

Brokerages, which help connect businesses looking for coverage with insurers, have been aggressively merging to diversify, boost commissions and serve customers who increasingly want to deal with fewer intermediaries. The deal would have combined the second- and third-largest brokers, allowing the new company to overtake market leader Marsh & McLennan Co.

Aon explored a tie-up with Willis Towers in 2019, but abandoned the deal after reports about the talks. Analysts at the time had warned that regulatory issues could prove to be a hurdle for any transaction. A year later, Aon and Willis Towers were back at the deal table.

The case marks the first lawsuit by the Justice Department to stop a merger under the Biden administration, which last week named Jonathan Kanter, a long-time foe of technology giants, to lead the department’s antitrust division.

Analysts at Piper Sandler & Co. led by Paul Newsome said in a note that Arthur J. Gallagher & Co.’s stock could face short-term pressure given the broker recently agreed to purchase $3.57 billion worth of assets divested in anticipation of the merger.

Aon also announced the extension of employment agreements for Case and Chief Financial Officer Christa Davies for an additional three years, through April 1, 2026, it said in a separate regulatory filing.

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