The EC has given Aon’s $30bn acquisition of Willis Towers Watson (WTW) conditional approval on the back of a raft of previously announced divestments of WTW business to A J Gallagher and other buyers.
The news follows an investigation by European anti-competition regulators into the deal over fears it will reduce choice for Aon and WTW customers. The investigation raised concerns over areas including broking services for large companies and multinationals in Europe, reinsurance buyers and pension administration in Germany.
Aon agreed to sell various WTW businesses in Europe, the US and Bermuda for $3.57bn following the investigation, to assuage the EU and other regulators around the world.
The European business will include commercial and corporate risk and broking services in France, the Netherlands, Spain and Germany. Aon has also agreed to sell its German pensions and investment business to UK-based consultancy Lane Clark & Peacock to get its deal past the EC.
The EC has now conditionally approved the deal based on Aon’s “substantial” remedy package. It added that its decision is conditional upon full compliance with the commitments.
The full list of proposed remedies would see Aon sell WTW’s entire commercial risk brokerage country organisations in France, Germany, Spain and the Netherlands to A J Gallagher.
A J Gallagher will also pick up WTW’s cyber brokerage business in the UK, its entire space and aerospace manufacturing brokerage business, and global treaty and facultative reinsurance and brokerage organisations. A J Gallagher will also acquire a “substantial” set of additional international and EEA customer contacts and personnel.
In addition, Aon will have to divest its entire German retirement benefits consulting and pension administration businesses, as well as its German investment solutions business.
“Following the results of the market test, in which European customers identified Gallagher, the next closest competitor to the ‘big three’, as the most suitable purchaser of the commercial risk and reinsurance divestment business, the Commission concluded that the transaction, as modified by the commitments, would no longer raise competition concerns,” said the EC.
It added that Aon can only complete the acquisition of WTW once the EC has formally assessed and approved A J Gallagher as a suitable buyer of the proposed businesses.
The EC’s executive vice-president Margrethe Vestager, in charge of competition policy, said: “European companies rely on brokers to obtain best possible solutions to manage their commercial risk. Aon and Willis Towers Watson are leading players in the insurance and reinsurance brokerage markets. The remedy package accepted by the Commission ensures that European companies, including insurance companies and large multinational customers, will continue to have a good choice and good services when selecting a broker suitable for their needs.”
Aon and WTW said the move is a “major step” towards obtaining regulatory clearance for the proposed merger.
“Both firms operate across broad, competitive areas of the economy and believe this approval affirms that our proposed combination will accelerate innovation on behalf of clients, creating more choice in an already dynamic and competitive marketplace,” they said in a statement.
But the deal still faces considerable hurdles, not least in the US where the Department of Justice (DoJ) has filed a suit against Aon and WTW to block the deal over competition concerns.
The trial is scheduled to start proceedings on 18-23 November and resume on 20-22 December.
The DoJ, which argues the deal would reduce competition and drive higher prices, had originally sought a court date for after February 2022, but Aon/WTW said the delay was “unacceptable” and threatened to derail the deal, first agreed in March 2020.
The brokers had been pushing for the DoJ trial to take place next month to give them a chance of completing within the timeframe set out in the original merger agreement
Aon had hoped to complete the deal by the end of this month. But the DoJ’s antitrust suit against Aon/WTW last month has added further complexity and seriously delayed the plans.
Aon faces a $1bn breakup fee if it walks away from the deal, with some analysts expecting further selloffs to appease the DoJ.
There are also ongoing regulatory concerns in Asia and Australasia over the merger.
Following the EC’s conditional approval, Aon and WTW said they remain committed to the deal and continue to work toward obtaining regulatory approval in all relevant jurisdictions.
Aon has confirmed the promotion of Eduardo Dávila to CEO of commercial risk, health and affinity in EMEA, excluding the UK, this week after John Cullen stepped down from the role at the end of June. Julie Page will be responsible for the UK as CEO of commercial risk, health and affinity in the country, now reporting directly to Eric Andersen, president of Aon.
The changes were announced back in January in anticipation of Aon’s acquisition of Willis Towers Watson (WTW) But Aon has made the changes ahead of the deal.