Advisory firm Aon has acquired its peer Willis Towers Watson in an all-stock deal, the two firms announced Monday.
The combined entity, which will be called Aon, will be led by Aon’s chief executive officer Greg Case and the firm’s chief financial officer, Christa Davies. Willis Towers CEO John Haley will take on the role of executive chairman, according to the announcement.
“This combination will create a more innovative platform capable of delivering better outcomes for all stakeholders, including clients, colleagues, partners, and investors,” said Case in a statement.
Willis Towers Watson shareholders will receive 1.08 Aon shares for every Willis Towers share they own. This makes the total consideration for Willis Towers shares $231.99 each, a 16.2 percent premium to the firm’s Friday close, according to a presentation on the deal.
Existing Aon shareholders will hold the same number of shares in the new company, the announcement said.
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Once the deal closes, which is set to take place in 2021, existing Aon shareholders will own about 63 percent and existing Willis Towers shareholders will own 37 percent of the combined entity, according to the announcement.
The implied combined equity value of the two is approximately $80 billion, according to the announcement.
The two firms anticipate that they will save $267 million in the first full year of combination, $600 million in the second, and $800 million in the third, the announcement said. Free cash flow accretion is expected to break even in the second year following the deal.
The two companies were not immune to the sharp drop in markets on Monday. As of 11 a.m. Eastern Standard Time, Aon share prices had fallen roughly 14 percent, while Willis Towers shares had fallen 7 percent. At that time, the Standard & Poor’s 500 stock index had fallen about 6.4 percent.