Aon and Willis Towers Watson scrap $30 billion merger amid antitrust dispute

Aon Plc and Willis Towers Watson Plc canceled a $30 billion merger that would have formed the world's largest insurance broker on Monday, citing objections from U.S. authorities.

Last month, the DOJ filed a lawsuit against the merger, the first major test of the Biden administration's tougher antitrust policies. According to the suit, which was filed in federal court in Washington, the proposed combination will result in increased costs and less innovation for U.S. businesses, employers, and unions that rely on their services.

The transaction would have pushed London-based Aon ahead of Marsh & McLennan, the world's largest insurance broker.

Willis will receive a $1 billion termination fee from Aon, the timing and financial effect of which were not immediately clear. On Friday, Aon will release its second-quarter earnings. Willis said that it will increase share repurchases by $1 billion.

“Despite regulatory momentum around the world, including the recent approval of our combination by the European Commission, we reached an impasse with the U.S. Department of Justice,” Aon Chief Executive Officer Greg Case said in a statement.

The Department of Justice said that merging the two big insurance brokers would impair competition in reinsurance broking, retirement and pension planning, and private retiree multicarrier healthcare exchanges.

Last week, a federal court limited the scope of the lawsuit after Aon and Willis agreed to divestitures to get permission in the United States and Europe following negotiations with regulators.

Aon's US retirement unit, US retiree healthcare exchange, and German retirement company were all sold. Willis Towers Watson's worldwide reinsurance business was also included. The combination was authorized by EU antitrust officials earlier this month, subject to certain conditions.

The businesses' decision to cancel the transaction confirms market forecasts that Washington is prepared to take a tough stance against mergers in areas with few rivals.

Aon and Willis Towers, both located in Ireland, are the industry's second and third largest brokers in terms of revenue, trailing industry leader Marsh & McLennan Cos. of New York. They would have combined annual revenue of over $20 billion, surpassing Marsh’s $17.2 billion.

Aon and Willis are both listed in New York. Aon's shares surged more than 9.39% on Monday, while Willis Towers' stock plummeted 8.60%.

With inputs from Reuters 

Picture Credits: NYT