Corporation Aon, the world's largest insurance broker, fell just more than a year after agreeing to buy a Hewitt Associates, Inc. for $ 4.9 billion in cash and stock.Aon fell $ 2.59, or 6.8 percent, to $ 35.75 at 9:33 am in New York Stock Exchange composite trading. Cash and stock deal Hewitt value of $ 50 per share, or 41 percent more than the closing price of the consulting firm on July 9, Chicago-based Aon said in a statement today.
"In the short term is negative," said Meyer Shields, an analyst with Stifel Nicolaus & Co., who "buy" rating on the stock in Aon. "Integration is always dirty, and Aon uses undervalued stock to pay for it."
Purchase Aon's largest, surpassing its $ 1.4 billion acquisition of reinsurance broker Benfield Group Ltd. in 2008, according to data compiled by Media. A company that earns commissions by matching buyers and sellers of insurance tends to increase revenue with the purchase of Hewitt, which provides payroll and consulting services to 3000 clients.
The broker will pay $ 25.61 cash and 0.6362 a share for each share of Aon Hewitt. Hewitt jumped 33 percent to $ 33.42. Share slide Aon was the most since it fell by 14 percent since May 1, 2009.
Aon, headed by the Chief Executive Officer Greg Case, merge Lincolnshire, Ill.-based Hewitt per unit Aon Consulting and Aon rename unit Hewitt. The company expects to reap $ 355 million annual savings by reducing office costs and duplicative managers. Russ Fradin, chairman and chief executive officer of Hewitt will head the combined department and submit a case which was an adviser to McKinsey & Co. before replacing Patrick Ryan, Aon as CEO in 2005.
More Consulting
Case, 47, is to increase business consulting, which trails Marsh McLennan and Kos, the second largest insurance broker, in size. Aon Consulting revenue fell about 7 percent last year to $ 1.3 billion. consultations in New York, and Marsh McLennan unit, which includes units of Mercer and Oliver Wyman, published about $ 4.6 billion in revenue last year, 11 percent since 2008.
"It's definitely going to make them much more consulting operations than they were before," said Paul Newsome, an analyst at Sandler O'Neill Partners LP in Chicago. "There is going to be some scale benefits. The other thing that they get more recognition. I think from the perspective of pure consulting Hewitt better name than Aon".
'Expanding the portfolio'
Aon said he pays about 7.5 times forecast Hewitt's earnings before interest, taxes, depreciation and amortization for 2010 fiscal year. Credit Suisse Group AG and Morgan Stanley will arrange a $ 1 billion 3-year term loan and a $ 1.5 billion bridge loan.
"This combination creates a strong and compelling set of human capital within the industry," Case said at the conference. "This is about growth and building our company."
Aon cut jobs for the "dismissal" after the transaction, Case said.
Credit Suisse acted as financial advisor to Aon Corporation and Citigroup Inc said Hewitt of the transaction. Aon said that he expects to complete the purchase by mid-November.
