Willis Re divestment seen necessary for Aon – WTW merger to complete

The industry sees a high chance that in order for Aon’s acquisition of rival Willis Towers Watson to go ahead, divestment will be required and a sale of reinsurance broking unit Willis Re is seen as a likely outcome.

Our sister publication Reinsurance News polled its readers and 73% of the industry participants that responded said they expect regulators will require a sale of Willis Towers Watson’s (WTW) reinsurance subsidiary, Willis Re, if the much publicised mega-merger with Aon is to go ahead.

The merger of insurance and reinsurance broking giants Aon and Willis Towers Watson (WTW) has come under increased scrutiny from regulators of late. The European Commission (EC) opened what it calls an “in-depth” investigation of the insurance and reinsurance broking mega-merger, citing concerns over the potential impact to competition in some key markets, one of which is specifically cited as the reinsurance arena.

As we previously explained, analysts have also pointed to the sale of Willis Re as a possibility, perhaps necessity, in order to get the merger deal completed. So, Reinsurance News polled its readers and asked whether they felt a sale of Willis Re would be necessary to get the deal over the line. Just 27% of respondents believed the Aon and WTW merger will be completed without this specific divestment being required, the rest saying a sale of Willis Re would be necessary.

Our sources tell us that at least one unsolicited direct approach to buy Willis Re has already been made, but we’re told the price offered was considered too low. Broker multiples have been very high lately and Willis Re would be a premium buy for any of the companies likely to be deemed in the running (AJG, Howden Group, Lockton, TigerRisk, BMS, Beach, Holborn, Tysers etc).

Other approaches are likely, as there are a number of potential parties that would be interested in buying Willis Re to expand their own reinsurance broking footprint. It seems likely the merger parties, Aon and WTW, will wait to hear from regulators before making any direct effort to sell the reinsurance broking unit, or other entities within the groups.

But should the right offer to acquire Willis Re come along at the right price, we suspect a sale may be deemed too enticing, especially when you consider the already significant reinsurance broking footprint Aon commands on its own.

Source: Artemis