Marsh & McLennan to buy JLT for $5.6bn

Marsh & McLennan Companies (MMC) is set to buy rival Jardine Lloyd Thompson (JLT) in a $5.6bn cash deal. The parent company of Marsh and Guy Carpenter said the deal for London-listed JLT has been approved by boards on both sides of the transaction. The bid amounts to $5.6bn in fully diluted equity value, or an estimated enterprise value of $6.4bn. JLT shareholders will receive £19.15 per share, which represents a 34% premium on their closing price on 17 September just before the deal was announced. MMC said the purchase will be funded by a combination of cash on hand and proceeds from debt financing. Once the deal completes, Dominic Burke, group CEO of JLT, will join MMC as vice-chairman and serve as a member if its executive committee. JLT’s largest shareholder – Jardine Matheson Holdings – is supporting the bid. Along with JLT directors, it owns 40.5% of JLT shares that will support the transaction. MMC said the acquisition “accelerates” its strategy to become the leading global risk, strategy and people firm. It said JLT has a track record of strong organic growth and attractive geographic diversification. MMC believes this will enhance its ability to accelerate growth and margin-expansion across products and geographies. The takeover will see Marsh again become the world’s largest insurance broker. While its scale may provide benefits for risk managers, they will be concerned that the deal leaves them with even less choice when it comes to choosing their intermediary. JLT operates in 40 countries, with particular focus in the UK, Australia and key emerging markets across Asia and Latin America. The broker provides risk and insurance broking advice to energy, mining, healthcare, construction, marine, aerospace and financial services firms through its specialty business. JLT also has a reinsurance arm and employee benefits business. Dan Glaser, president and CEO of MMC, said the acquisition will create a “compelling value proposition” for clients, colleagues and shareholders. “The complementary fit between our companies creates a platform to deliver exceptional service to clients, and opportunities for our colleagues… I am confident that with the addition of the talented colleagues of JLT, Marsh & McLennan will be an even stronger and more dynamic company,” he added. Mr Burke said that MMC “is, and always has been, one of our most respected competitors and I believe that, combined, we will create a group that will truly stand as a beacon for our industry”. The two companies expect to see annual cost synergies of approximately $250m during the next three years. But this will be more than offset by one-off integration costs of about $375m. The takeover follows heavy M&A activity in the (re)insurance industry this year. AXA has bought XL Group for $15.3bn, and in January AIG announced it will acquire Bermudian firm Validus for $5.6bn. Last month, The Hartford agreed to buy rival Navigators for $2.1bn, and Aspen agreed to be bought by investment firm Apollo for $2.6bn. Meanwhile, SCOR has rejected an €8.2bn takeover bid from French group Covéa. However, there remains speculation that a higher bid might come in from Covéa or elsewhere. Last week China Reinsurance announced it is set to spend close to a billion dollars acquiring specialty insurer Chaucer from Hanover Insurance. In another interesting move, US-based insurer Markel announced a deal last week to buy the world’s biggest insurance-linked securities asset manager, Nephila, which has some $12bn of assets under management.

Marsh & McLennan to buy JLT for $5.6bn

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