Re/insurance broking giants Aon and Willis Towers Watson have terminated their much publicised mega-merger, 16 months after the deal was officially announced to the world.
The decision appears to have been driven by what Aon Chief Executive Officer Greg Case describes as “an impasse with the US Department of Justice.”
Despite quickly becoming one of the industry’s biggest and most talked about news stories, the odds of these two broking heavyweights actually clearing the necessary regulatory approvals has been in constant flux.
It was only a few weeks ago that the European Commission gave the combination a greenlight, albeit one dependant on full compliance with a substantial set of commitments offered by Aon, including the divestment of central parts of WTW’s business to rival player Gallagher.
This ruling prompted a joint-statement from Aon and WTW on July 9 that described the approval as a “major step” forward in the merger.
Things seemed to gain further momentum when on July 12 New Zealand regulators cleared a path for the deal’s approval in the region.
However this path, much like the one outlined by the the EC, was dependent on a multitude of concessions aimed at preserving a competitive environment.
Ultimately, it appears this mega-merger’s demise was met at the hands of the US Department of Justice (DOJ), which in June moved to block the deal.
The complaint filed by the DOJ stated that Aon and WTW operate in an oligopoly and that by coming together, would be handed even greater leverage to increase prices and lower the quality of services relied on by thousands of US businesses, as well as their customers, employees, and retirees.
In today’s statement, Case rebukes such claims by outlining a belief that the DOJ’s position overlooked the ways in which the two brokers’ complementary businesses operate across broad, competitive area 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,” said Case.
In connection with the termination of the business combination agreement, Aon will pay the $1 billion termination fee to WTW, whose proposed scheme of arrangement has now lapsed, allowing both organisations to move forward independently.
Additionally, Gallagher has confirmed that its role in the deal has now been terminated, noting that it plans to exercise the special optional redemption feature of its $650 million tranche of 10-year senior notes issued on May 20th, 2021.
It also appears as though WTW will be return its termination fee to shareholders, increasing its share repurchase program by $1 billion.
Commenting on the deal breakdown, analysts at KBW have said they are “very surprised” amid a belief that senior management at Aon would be able to extract meaningful value from even a partial net acquisition of WTW’s assets.