Arthur J. Gallagher & Co. announced on Friday that it has agreed to buy Willis Towers Watson PLC's reinsurance business for a purchase price that could rise to $ 4 billion.
The announcement comes less than a month after a deal for Gallagher to buy a larger stake in Willis' $ 3.57 billion business collapsed after the transaction it depended on – Aon PLC's much larger proposed acquisition of Willis – ended in the face of government opposition.
Under the terms of the latest deal, which is expected to close in the fourth quarter, Gallagher will make an initial payment of $ 3.25 billion and possibly pay another $ 750 million subject to three-year revenue targets, a Gallagher statement said.
The business Gallagher buys generated $ 745 million pro proma revenue in 2020 and $ 265 million in revenue. The figures include Gallagher's estimate of "crimes" from lost business and employees. Many employees have left Willis since Aon announced its plan to buy its rival in March 2020.
The integration of the Willis business is expected to take three years and cost $ 250 million, the statement said.
The deal will significantly expand Gallagher's reinsurance business which elevates it to the top three behind reinsurance business for rivals Aon and Marsh & McLennan Cos. Inc.