£1.1bn deal puts broker ahead of Arthur J Gallagher.

Willis has leapfrogged rival Arthur J Gallagher to become the third largest broker in the US after acquiring Hilb, Rogal & Hobbs (HRH) in a blockbuster $2.1bn (£1.1bn) deal.

The new business will be known as Willis HRH.

HRH's UK business has revenues of $57m - ranking it 32nd in the UK - and includes Lloyd's broker, Glencairn.

Willis Group president, Graham Millwater said Glencairn would allow Willis to expand its specialisms, but declined to comment on the company’s integration plans.

After a three-year period of grace, HRH will be stopped from collecting contingent commissions in the US worth around $50m per year, because of regulations governing the larger brokers, including Willis.

However Willis chairman and chief executive Joe Plumeri said he was confident that Willis could offset the subsequent loss by raising commissions by as little as 0.3 per cent.

"I just don't see it as a big deal," he said.

Willis is reviewing its commissions across the globe, but said it would not impact on the review outside the US.

Plumeri ruled out making any further significant acquisitions in the US, putting paid to speculation linking it with larger rival Marsh. He added that Willis would take a look at further acquisition opportunities overseas.

The price tag of HRH was 2.4 times its $800m brokerage, and a multiple of around 7 times its EBITDA.

The news was welcomed by analysts, but Willis shares fell 6 per cent – wiping over $300m off its market cap.

On Wednesday morning, Moody's announced it had the broker's rating on review on the grounds that the acquisition could "significantly weaken" its financial position.

In its investor rerport, Willis estimates that HRH's organic growth and EBIDTA will remain flat for the next two years. In a conference call, the broker described the projections as conservative.

Despite HRH's operating margin of 20 per cent, Willis insisted it would still hit its combined target of 29 percent (excluding amortisation) by 2010.

On Monday, Plumeri added that he expected the rating agencies to confirm their positive outlooks for the company in due course.