London, UK (Aug. 13, 2021) – Willis Towers Watson, a leading global advisory, broking and solutions company, is pleased to announce an agreement with Arthur J. Gallagher & Co (Gallagher) to purchase Willis Re. Completion of the deal is subject to the receipt of required regulatory approvals and clearances, as well as other customary closing conditions and consultation where required. The business will be divested for a total upfront cash consideration of $3.25 billion plus an earnout payable in 2025 of up to $750 million in cash, subject to certain adjustments.
John Haley, CEO, Willis Towers Watson (WTW), said, “Following the termination of the proposed combination with Aon, we have been taking time to reflect on what we have learned about WTW over the last 16 months and determine how we will move forward as an independent company. As part of this, we conducted a review of strategic alternatives for Willis Re, our global reinsurance business. While we highly value Willis Re and our colleagues who contribute to its success, we concluded that divestment was the appropriate path for this business and for WTW.
We are excited about our go forward portfolio of businesses and believe we are well positioned to compete vigorously around the world and make investments to grow organically and inorganically. We are winning new business, bringing the best to our clients and actively engaging and recruiting talent. And, we are going to continue to innovate and adapt to address evolving client needs. We look forward to sharing more about our future plans during our upcoming Investor Day on September 9.”
The transaction is anticipated to close no later than the end of the first quarter of 2022, subject to regulatory approvals.
About Willis Towers Watson
Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 45,000 employees serving more than 140 countries and markets. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential. Learn more at willistowerswatson.com.
SOURCE: Willis Towers Watson
→ See Gallagher’s announcement
Safe Harbor Statement
This press release and related oral communications contain certain statements that are forward-looking in nature, as that term is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are prospective in nature and are not based on historical facts, but rather current expectations of management about future events. Forward-looking statements can often, but not always, be identified by the use of words such as “plans,” “expects,” “is subject to,” “budget,” “scheduled,” “estimates,” “forecasts,” “looking forward”, “potential,” “probably”, “continue,” “intends,” “anticipates,” “believes,” or variations of such words, and statements that certain actions, events or results “may,” “could,” “should,” “would,” “might” or “will” be taken, occur or be achieved. WTW management gives no assurance that these expectations will prove to be correct.
These forward-looking statements include information about possible or assumed future results of WTW’s operations, the uncertainty surrounding the COVID-19 pandemic, and expectations related to the Transaction or to any potential payment related to the earn out, if at all. All statements other than statements of historical facts that address activities, events or developments that WTW expects or anticipates may occur in the future, including such things as its or their outlook, future capital expenditures, growth in commissions and fees, changes to the composition or level of its or their revenues, cash flow and liquidity, expected tax rates, business strategies, competitive strengths, goals, the benefits of new initiatives, growth of its or their business and operations, plans, references to future successes, and expectations with respect to the timing, closing and benefits of the Transaction are forward-looking statements.
By their nature, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from either historical or anticipated results depending on a variety of factors. The following factors, among others, could cause actual results to differ from those set forth in or anticipated by the forward-looking statements: changes in global, political, economic, business, competitive, market and regulatory forces, future exchange and interest rates, changes in tax laws, regulations, rates and policies; general economic and political conditions in different countries in which WTW does business around the world, including the U.K.’s withdrawal from the European Union; changes in the competitive environment or damage to WTW’s reputation; fluctuations in exchange and interest rates that could influence revenue and expenses; changes in global equity and fixed income markets that could affect the return on invested assets; changes in the funding status of WTW’s various defined benefit pension plans and the impact of any increased pension funding resulting from those changes; the level of WTW’s debt limiting financial flexibility or increasing borrowing costs; rating agency actions that could affect WTW’s ability to borrow funds; volatility in WTW’s tax rate due to a variety of different factors, including U.S. tax reform; changes in estimates or assumptions on WTW’s financial statements; limits on WTW’s subsidiaries to make dividend and other payments to WTW, as applicable; the impact of lawsuits and other contingent liabilities and loss contingencies arising from errors and omissions and other claims against WTW; the impact of, and potential challenges in complying with, legislation and regulation in the jurisdictions in which WTW operates, particularly given the global scope of WTW’s businesses and the possibility of conflicting regulatory requirements across jurisdictions in which WTW does business; the impact of any investigations brought by regulatory authorities in the U.S., Ireland, the U.K. and other countries; the impact of any inquiries relating to compliance with the U.S. Foreign Corrupt Practices Act and non-U.S. anti-corruption laws and with U.S. and non- U.S. trade sanctions regimes; failure to protect intellectual property rights or allegations that WTW infringes on the intellectual property rights of others; the effects of Irish law on WTW’s operating flexibility and the enforcement of judgments against WTW; the failure to retain and attract qualified personnel, whether as a result of the Transaction, the previously announced termination of the prior business combination agreement with Aon plc and the prior sale agreement with Gallagher related thereto, or otherwise; international risks associated with WTW’s global operations; the effects of natural or man-made disasters, including the effects of COVID-19 and other health pandemics; the potential of a system or network breach or disruption resulting in operational interruption or improper disclosure of personal data; WTW’s ability to develop and implement new technology; the damage to WTW’s reputation among clients, markets or third parties; the actions taken by third parties that perform aspects of WTW’s business operations and client services; the extent to which WTW manages certain risks created in connection with the services, including fiduciary and investments, consulting, and other advisory services, among others, that WTW currently provides, or will provide in the future, to clients; WTW’s ability to continue, and the costs and risks associated with, growing, developing and integrating companies that it acquires or new lines of business; changes in commercial property and casualty markets, commercial premium rates or methods of compensation; changes in the health care system or WTW’s relationships with insurance carriers; WTW’s ability to implement initiatives intended to yield, and the ability to achieve, cost savings; the possibility that the Transaction will not be consummated in the expected timeframe, or at all; failure to obtain necessary regulatory approvals for the Transaction or to comply with the requirements related to such approvals, or to satisfy any of the other conditions to the Transaction; failure to receive any benefit from the earnout for any reason including without limitation risks related to the performance of the business subject to the earnout; potential litigation associated with the Transaction, including by regulators; adverse effects on the market price of WTW’s securities and/or operating results for any reason, including, without limitation, because of a failure to consummate the Transaction in the expected timeframe, or at all; the failure to realize the expected benefits of the Transaction in the expected timeframe, or at all; significant transaction costs or difficulties in connection with the Transaction, and unknown or inestimable liabilities; the potential impact of the announcement or consummation of the Transaction on relationships, including with suppliers, customers, employees and regulators; and general economic, business and political conditions (including any epidemic, pandemic or disease outbreak, including COVID-19) that affect WTW.
Any or all of WTW’s forward-looking statements may turn out to be inaccurate, and there are no guarantees about WTW’s future performance. The factors identified above are not exhaustive. WTW and its subsidiaries operate in a dynamic business environment in which new risks may emerge frequently. Other unknown or unpredictable factors could also cause actual results and developments to differ materially from those expressed or implied by the forward-looking statements. Forward-looking statements should therefore be construed in the light of such factors. Accordingly, you should not place undue reliance on forward-looking statements, which speak only as of the date on which they are made. In addition, results for the year ended December 31, 2020, the quarter ended March 31, 2021, and the quarter ended June 30, 2021, are not necessarily indicative of results that may be expected for any future period, particularly in light of the continuing effects of the COVID-19 pandemic.
Further information concerning WTW and its businesses, including factors that potentially could materially affect WTW’s financial results, are contained in WTW’s respective filings with the Securities and Exchange Commission (the “SEC”). See WTW’s Annual Reports on Form 10-K for the year ended December 31, 2020 and its Quarterly Reports on Form 10-Q for the quarter ended March 31, 2021, and the quarter ended June 30, 2021, for a further discussion of these and other risks and uncertainties applicable to WTW and their respective businesses. These factors may be revised or supplemented in subsequent reports filed with the SEC. WTW is not under, and expressly disclaims, any obligation to update or alter any forward-looking statement that it may make from time to time, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to WTW and/or any person acting on its behalf are expressly qualified in their entirety by the foregoing paragraphs, and the information contained on any websites referenced in this press release is not incorporated by reference into this press release.
Arthur J. Gallagher & Co. Announces Agreement To Acquire Willis Towers Watson plc Treaty Reinsurance Brokerage Operations
Rolling Meadows, IL (Aug. 13, 2021) – Arthur J. Gallagher & Co. is pleased to announce an agreement to acquire the treaty reinsurance brokerage operations of Willis Towers Watson plc. The transaction is expected to close during the fourth quarter of 2021.
“Broadening our reinsurance brokerage offerings has been a strategic objective at Gallagher and this acquisition will significantly enhance our global value proposition,” said J. Patrick Gallagher, Jr., Chairman, President and CEO. “We were very impressed with the Willis Towers Watson reinsurance professionals we met during our initial due diligence and strongly believe a combination will significantly enhance our offerings to clients and prospects. I look forward to welcoming the 2,200 new colleagues joining us as part of this transaction to our growing Gallagher family of professionals.”
Benefits of the acquisition are expected to include:
- Expanded global value proposition within reinsurance brokerage
- A broad suite of analytics capabilities including actuarial services, catastrophe modeling, dynamic financial analysis, rating agency analysis and capital modeling
- Addition of talented management team
- Increased product breadth & offerings
- Further leveraging of Gallagher’s industry-leading alternative risk and ILS business
- Strengthened relationships with major insurance carriers
The operations include all of Willis Re’s treaty reinsurance brokerage operations. For the year ended December 31, 2020, these operations generated $745 million of estimated pro forma revenue and $265 million of estimated pro forma EBITDAC. The pro forma 2020 figures include revenues reported in Wills Re’s 2020 unaudited financial information, and reflect known growth, as well as Gallagher’s estimate of “breakage”, defined as known lost business and the departure of key brokers and other employees, as well as normalization of operating expenses and additional investments. Willis Re’s treaty reinsurance business operates in 24 countries, places over $10 billion of premium annually and represents over 750 insurance and reinsurance company clients.
Key Transaction Terms
Under the agreement, Gallagher will acquire the combined operations for an initial gross consideration of $3.25 billion, and potential additional consideration of $750 million subject to certain third-year revenue targets. Gallagher intends to finance the transaction using cash on hand, including the $1.4 billion of net cash raised via its May 17, 2021 follow-on common stock offering and the $850 million of net cash borrowed via its May 20, 2021 30-year senior note issuance, short-term borrowings and additional free cash generated before close. The funding contemplates Gallagher maintaining its investment grade debt rating.
Integration is expected to take approximately 3 years with total non-recurring integration costs estimated to be approximately $250 million. After giving effect to these assumptions and pro forma results discussed above, the acquired operations would have been approximately 5% accretive to Gallagher’s 2020 adjusted GAAP EPS excluding earnings from clean energy investments and 9% accretive to Gallagher’s 2020 adjusted GAAP EPS excluding amortization and earnings from clean energy investments (see table for 2020 non-GAAP reconciliation).
Other Acquisition Transaction Information
The transaction is subject to customary regulatory approvals. More information, including a presentation outlining the transaction, can be found on the company’s website at www.ajg.com. The estimates provided in this release and the presentation on the company’s website, may be updated before the transaction closes as more information becomes available.
A replay of the conference call with J. Patrick Gallagher, Jr., Chairman, President and CEO, is available on the company’s website. The replay can be accessed by going to Investor Relations and clicking on Events & Presentations.
Pro forma revenues – Pro forma revenues reflect Gallagher’s estimate of revenues reported in the acquired operations’ 2020 unaudited financial information, reflecting known growth, as well as “breakage”, defined as known lost business and the departure of key brokers and other employees.
Other Cost Adjustments – In addition, specific costs have been identified as adjustments to the acquired operations’ 2020 financial statements in order to better reflect Gallagher’s estimate of pro forma EBITDAC. Specifically, these cost adjustments include the normalization of operating expenses to reflect the extraordinary impact of the COVID-19 pandemic in 2020 and additional investments in operations attributed to the target business based on the estimated costs to provide specific services from the center.
Advisors – Morgan Stanley & Co. LLC acted as a financial advisor to Gallagher on this transaction.
About Arthur J. Gallagher & Co.
Arthur J. Gallagher & Co. (NYSE: AJG), a global insurance brokerage, risk management and consulting services firm, is headquartered in Rolling Meadows, Illinois. The company has operations in 57 countries and offers client service capabilities in more than 150 countries around the world through a network of correspondent brokers and consultants. For more information, visit www.ajg.com.
This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements relate to expectations or forecasts of future events and use words such as “anticipate,” “believe,” “estimate,” “expect,” “contemplate,” “forecast,” “project,” “intend,” “plan,” “potential,” and other similar terms, and future or conditional tense verbs like “could,” “may,” “might,” “see,” “should,” “will” and “would.” You can also identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. Examples of forward-looking statements in this press release include, but are not limited to, statements regarding the expected timing of a proposed transaction with Willis Towers Watson plc, the benefits of the proposed transaction with respect to our global value proposition, the expected consideration to be paid in the proposed transaction, the expected revenue, EPS (including adjusted EPS excluding clean energy and adjusted EPS excluding clean energy and amortization), EBITDAC and credit rating impacts of the proposed transaction, the size and status of the combined organization within various jurisdictions, required regulatory approvals, the expected timing of the completion of the proposed transaction, expected duration and cost of integration, and the anticipated financing of the proposed transaction.
Readers are cautioned against relying on any forward-looking statements, which are neither statements of historical fact nor guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements include (a) risks related to the integration of the acquired operations, businesses and assets into our company; (b) the possibility that the proposed transaction is not completed when expected or at all because required regulatory approvals are not received or other conditions to the closing are not satisfied on a timely basis or at all; (c) the risk that our free cash generation is insufficient, or the financing required to fund the proposed transaction is not obtained on the terms anticipated or at all; (d) potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the proposed transaction; (e) the possibility that the anticipated benefits of the proposed transaction, including cost savings and expected synergies, are not realized when expected or at all, including as a result of the impact of, or issues arising from, the integration of the acquired operations into our company; (f) the possibility that our estimates of lost revenue in the acquired operations from breakage due to departing key brokers and other employees and the loss of clients are incorrect and actual lost revenue is greater than expected; (g) the increased legal and regulatory complexity of entering additional geographic markets, including the risks associated with the labor and employment law frameworks in certain countries where Gallagher does not currently operate; (h) conditions imposed in order to obtain required regulatory approvals; (i) the possibility that the proposed transaction may be more expensive to complete than anticipated, including as a result of unexpected factors or events; (j) diversion of management’s attention from ongoing business operations and opportunities; (k) the inability to retain certain key employees of the acquired operations or Gallagher; (l) competitive responses to the proposed transaction; (m) uncertainties as to the timing of the consummation of the proposed transaction and the ability of each party to consummate the proposed transaction; (n) that financial information subsequently presented for the acquired business in our subsequent public filings may be different from that presented herein and (o) additional factors discussed in the section entitled “Information Concerning Forward-Looking Statements” in Gallagher’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2021 and “Risk Factors” in Gallagher’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020. The COVID-19 pandemic currently amplifies, and in the future could continue to amplify, the risks, uncertainties and assumptions, reflected in such forward looking statements and risk factors.
Any forward-looking statement made by Gallagher in this press release speaks only as of the date on which it is made. Except as required by applicable law, Gallagher does not undertake to update the information included herein.
For additional disclaimers, Non-GAAP Measures, and Reconciliation of 2020 Adjusted EPS and EBITDAC before Clean Energy Investments, please refer to the original press release via Arthur J. Gallagher or PR Newswire.
SOURCE: Arthur J. Gallagher & Co.Tags: Acquisition, Arthur J. Gallagher, reinsurance, Willis Towers Watson (WTW)