Gallagher no longer buying major Willis Towers Watson assets

A bunch of Willis Towers Watson plc workers, who anticipated that their divisions were being sold to Arthur J. Gallagher & Co., will be staying with Willis Towers Watson after all.

Rolling Meadows, Ill.-based Gallagher announced July 26 that a US$3.57-billion deal with Willis Towers Watson has been nixed. Both brokerages have a major presence in Canada.

Had the deal gone through, Gallagher would have acquired a plethora of Willis Towers Watson operations. Those would have included a property and casualty brokerage business from predominantly middle-market and large-account clients, located in areas including San Francisco, Houston and Bermuda. Those operations place insurance in lines such construction and energy.

But Dublin-based Willis Towers Watson only decided to sell those operations – along with others – in order to give several different competition regulators peace of mind. This is because in 2020, Willis and Dublin-based Aon announced a US$30-billion merger agreement which would have formed the biggest brokerage in the world, easily topping New York City-based Marsh & McLennan Companies Inc.

Aon announced July 26 its deal with Willis is off. Aon also has a major presence in Canada.

Had Willis Towers Watson’s deal with Gallagher closed, Gallagher would have acquired Willis Re’s reinsurance brokerage operations plus certain retail brokerage operations in Germany, Netherlands, Spain and France. Gallagher would also have gained Willis Towers Watson cyber, space and aerospace products in Britain.

Aon, Willis and Gallagher rank second, third and fourth, respectively, worldwide, in the commercial P&C brokerage space, when measured by revenue in 2020, A.M. Best Company Inc. reported July 1. Marsh & McLennan Companies became the biggest in 2019 when Marsh & McLennan closed its acquisition of Jardine Lloyd Thompson. Marsh has a major presence in Canada.

Aon and Willis called their deal off after they “reached an impasse with the U.S. Department of Justice,” Aon CEO Greg Case stated July 26 in a release.

The DoJ announced June 16 that its anti-trust division is asking the U.S. District Court for the District of Columbia to declare that an Aon-Willis merger would have violated an American law that prohibits mergers and acquisitions where the effect “may be substantially to lessen competition, or to tend to create a monopoly.”

Instead of fighting the DoJ in court, Aon and Willis Towers Watson called off the merger, with Aon owing a US$1 billion breakup fee.

Aon contends that the U.S. DoJ’s lawsuit reflects a lack of understanding of Aon’s business, the clients Aon serves and the marketplaces in which Aon operates.

The DoJ claimed in its court filing that Marsh, Aon and Willis Towers Watson “dominate competition for insurance broking for the largest companies in the United States, almost all of which are customers of at least one of them.”

Feature image via iStock.com/RapidEye