Discussions about a potential merger between re/insurance brokers Aon and Willis Towers Watson (WTW) began in January 2019, according to a new timeline of the transaction released by both firms.
The document shows that CEOs Greg Case and John Haley first met on January 30, 2019 to explore options for a combination that would eventually result in the March 2020 deal.
But Aon had been considering a business combination with WTW as early as November 16, 2018, several months before speculation about a deal surfaced in March 2019.
The timeline shows that Case and Haley followed up on their discussion in February and the Aon Board later expressed their approval for the company’s management to push the talks further.
However, after Aon responded to public speculation with a statement saying it did not intend to pursue a transaction with WTW, it became bound by Irish Takeover Rules that prevented it from announcing a deal within the next 12 months.
As such, Aon’s internal and external teams were informed that all plans concerning a possible transaction had been discontinued, and were instructed to cease all efforts to pursue a deal.
But because news outlets had already speculated about the merits of a combination between the brokers, Case and Haley were able to continue their discussions, starting in May 2019.
On May 24, for instance, the CEOs agreed that a combination of Aon and WTW could have significant potential benefits that may be worth exploring, including the creation of a combined company with complementary capabilities.
At this time, Aon’s view was that such a transaction would be considered a “merger of equals” and would not provide much, if any, premium to WTW shareholders.
WTW later determined that such a deal was not in the best interest of its shareholder and talks were shelved in September 2019.
It was not until December that the firms met again, with WTW now insisting that a combination would need to involve a meaningful premium for WTW shareholders, in the range of 20%.
Over the next two months of negotiations, the brokers agreed to an exchange ratio of 1.08 Aon Shares for each WTW Share, representing a premium of approximately 18.6% to the closing price of WTW shares on February 25, 2020.
Around this time, public speculation about a combination was reignited after WTW said it “strategic alternatives” for its wholesale arm, Miller, with the merger eventually confirmed on March 9th.
The transaction is now expected to close some time during the first half of 2021, and will create an entity with a combined equity value of approximately $80 billion.
The firms anticipate savings of $267 million in the first full year of the combination, reaching $600 million in the second full year, with the full $800 million achieved in the third full year.
Aon also claims that the transaction will generate more than $10 billion in shareholder value creation from the capitalized value of expected pre-tax synergies.
Upon completion, existing Aon shareholders will own approximately 63% and existing Willis Towers Watson shareholders will own approximately 37% of the combined company on a fully diluted basis.