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Global insurance broker Arthur J. Gallagher & Co. has agreed to acquire the treaty reinsurance brokerage operations of Willis Towers Watson, just weeks after a previous Gallagher deal to buy Willis Re fell through when brokers Aon and Willis terminated their $30 billion mega-merger agreement.

Under the new 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.

In the previous deal, Gallagher had agreed to buy Willis Re and other assets for about $3.6 billion.

Willis had agreed to sell the reinsurance unit to satisfy concerns of European regulators over preserving competition if they approved the Aon-Willis merger. That giant merger and the Willis Re and other divestments were cancelled when U.S. regulators objected to the merger on antitrust grounds.

Willis Towers Watson said on August 3, just days after the planned sale to rival Arthur J. Gallagher fell through, that it was considering strategic alternatives for Willis Re and that a sale of Willis Re was still possible, but the company did not then identify a buyer.

The operations being acquired by Gallagher include all of Willis Re’s treaty reinsurance brokerage operations. For the year ended December 31, 2020, these operations generated $745 million of estimated revenue and $265 million. Willis Re’s treaty reinsurance business operates in 24 countries, places over $10 billion of premium annually and represents more than 750 insurance and reinsurance company clients.

“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.”

Today, John Haley, CEO, Willis Towers Watson (WTW), confirmed the revived plan to sell to Gallagher.

“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,” Haley said. “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.”

Gallagher said it intends to finance the transaction using cash on hand.

The transaction is expected to close during the fourth quarter of 2021. Gallagher said integration is expected to take approximately three years and cost approximately $250 million.

Gallagher 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.

Topics Mergers & Acquisitions A.J. Gallagher Willis Towers Watson