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Willis Re purchase may still make sense for Gallagher: Analyst



In the wake of Aon PLC's attempt to acquire $ 30 billion of Willis Towers Watson PLC and the associated deal to sell Willis Re to Arthur J. Gallagher & Co., it would still be a "long-term positive" for Gallagher. to buy reinsurance brokers, according to an analyst.

A Gallagher acquisition of Willis Re would help "stabilize Willis Re's employee retention" and could have a higher multiple for the Willis business over the nine times profit before interest, taxes, depreciation and amortization of it. original deal between the two, said Meyer Shields, Baltimore-based CEO of Keefe, Bruyette & Woods Inc., in a note on Monday commenting on market reports.

The miniature arithmetic in Mr Shield's assumption presupposes a 1

3 times EBITDA multiple for a Willis Re agreement, although Gallagher shares may later trade lower on such terms. The deal would allow Willis' next CEO to focus on a smaller and more manageable company. Willis CEO John Haley was expected to retire when the planned Willis-Aon agreement was signed.

A Gallagher spokeswoman said in an email that the company did not comment on "market speculation".

Aon-Willis agreed to sell much of Willis Re to Gallagher earlier this year to address competition concerns from European regulators over the larger deal. The Willis Re-sale was dependent on the completion of the Aon-Willis deal and ended when Aon withdrew from the deal last week to buy Willis in the face or US government opposition. probably not bleed into future insurance contracts.

Timothy J. Cunningham, principal of Optis Partners LLC, a Chicago-based investment banking and financial advisory firm, said it was the size of the deal that attracted regulators' attention and that it should have "no chilling effect" on broader insurance mergers and acquisition market.

"Remember, this was the No. 2 and No. 3 broker in the United States, with nearly $ 10 billion in combined U.S. revenue," he said.

There is a sharp decline in the scale under the brokers' top law, Cunningham said.

"The 14th largest broker on Business Insurance (Top 100) is $ 860 million and a combination of any of No. 5 through No. 13 would still be less than No. 4 Gallagher (on global base), says Cunningham.

J. Paul Newsome Jr., Chicago-based CEO of stock research at Piper Sandler & Co., said it remains to be seen what effect or effects the scrapped merger could have. "We do not know because it just happened," he said. "There may be some additional regulatory steps to handle a large transaction."

The scope of the Aon-Willis deal made it unique and in the insurance sector there are no real analogues in terms of market concentration, Newsome said. "There are certainly companies as large as Aon or Willis," but no one has a "controlling share" of any industry.

The decline in the brokerage scale below the top brokers would make it less likely that future potential combinations would rise to the level of control given the Aon-Willis deal, he said.

During Aon's profit talks with other analysts during the second quarter On July 30, CEO Greg Case cited both the extent of the demands of the US Department of Justice, which had voted to block the deal, and an extended timeline "well into 2022" as the justification for scrap the deal to "create security and clarity."

US Attorney General Merrick B. Garland called the merger "a victory for competition and for American companies, and ultimately for their customers, employees and retirees."


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