JLT tipped to be next on broking giant’s shopping list – its shares spiked after Aon confirmed approach for Benfield.
Aon is understood to be preparing a takeover approach for rival broker JLT following its £844m bid for reinsurance broker Benfield.
Last week Aon, which is the UK’s largest broker, announced it had reached an agreement with Benfield over a deal that will bring together two of the world’s biggest reinsurance brokers. Aon will also assume £91m of Benfield’s net debt.
An Aon spokesman said more acquisitions could be made as part of its ongoing strategy, but he refused to be drawn on the details of any future merger.
The spokesman said: “Acquisitions are part of our strategy to generate the highest return on invested capital and we will continue to look for opportunities that fit that strategy and make sense in terms of scalability and scope.”
JLT refused to comment.
However, a senior industry source pointed to a spike in JLT’s share price after the Benfield offer was made public. JLT’s share price rose several times, most notably increasing from 437p to 455p on Friday morning and then hitting 467p on Friday afternoon.
A source close to Aon added that JLT was in its sights. He said: “Aon have spare cash flow and the appetite for further deals. Given the dominance of the big three brokers, it would be a natural fit.
“The only obstacle could be a Competition Commission block of the merger due to the dominance of the main players and the appetite of JLT’s private investors, who do not need to do the deal.”
In the mean time Aon intends to integrate Benfield into its reinsurance operation, Aon Global Re and rebrand it as Aon Benfield Re. It is understood that Aon will begin a hard cost-cutting process that could lead to the departure of several senior executives by the end of the year.
Grahame Chilton, chief executive of Benfield, will become vice-chairman of Aon Group under the new structure. He will report to Greg Case, chief executive of Aon Corporation. Michael O’Halleran and Andrew Appel will serve as executive chairman and chief executive, respectively, of Aon Benfield Re.
Case said: “Over the past several years, we have made significant progress in strengthening Aon’s operational platform and global network, becoming a more client-focused organisation with a broader portfolio of innovative products and services. With Aon Benfield Re, we will build on this progress to further enhance organic growth, expand margins, and drive shareholder value.”
Benfield’s Chilton said it was a “unique opportunity” to create a powerful global franchise.
“At the same time, the Benfield board believes the offer provides Benfield’s shareholders with fair and certain value,” he said. “We look forward to joining the Aon team and working with them as Aon Benfield Re to expand our joint expertise and local reach to customers around the world.”
Andrew Appel, chief executive of Aon Re Global, added: “The combination of our two firms will create an unparalleled set of capabilities to deliver distinctive client value, drive innovation in analytics and capital management, and enhance the value proposition for colleagues and team members in both businesses.”