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Willis Group Holdings Ltd. announced that the company has agreed to buy Virginia-based rival Hilb Rogal & Hobbs Co., according to a statement late on Sunday.
Willis said the $2.1 billion deal would double its “North American revenues and strengthen its leadership in attractive growth markets.” In addition Willis press bulletin noted that the acquisition of HRH would more than double its “High-Growth Employee Benefits Business in North America,” as well as adding “breadth and depth to other key practice areas.”
The new organization in North America will be renamed Willis HRH upon completion of the transaction. It will be led by an Office of the Chairman, including Don Bailey, currently CEO of Willis North America, as chairman and CEO, F. Michael Crowley, currently HRH president and COO, as president, and HRH Chairman and CEO Martin L. Vaughan, III, as vice chairman of Willis Group Holdings.
“Under the terms of the definitive agreement, Willis will acquire all of the outstanding shares of common stock of HRH for $46.00 per share, 50 percent cash and 50 percent stock,” said the announcement. The stock component is subject to a collar, which sets the value “based on the average trading price of Willis common stock during the 10-day period ending two days prior to the closing date.” The deal has an “equity value of approximately $1.7 billion and an enterprise value of approximately $2.1 billion,” said Willis. “The transaction is expected to close in the fourth quarter of 2008 and is subject to customary closing conditions, including regulatory and HRH shareholder approval.
“The total purchase price of $2.1 billion represents a multiple of 2.4 times estimated 2008 HRH revenues and less than 10 times estimated 2008 EBITDA (defined as earnings before interest expense, income taxes, depreciation and amortization), including the assumption of an estimated $400 million of HRH debt,” the announcement continued. “Annualized synergies are expected to amount to approximately $140 million by 2012.”
Willis also noted that it plans to “repurchase a majority of the shares issued in connection with the transaction under its previously approved $1 billion buyback plan.”
Willis also said it “expects the acquisition to be accretive to cash earnings per share from the close and to GAAP earnings per share from year two.”
The bulletin described the combination of Willis and HRH as “complementary,” noting that it will “substantially improve Willis’ position in important areas in North America including California, Florida, Texas, Illinois, New York, Boston, New Jersey and Philadelphia, and in key business lines.
“In particular, it will more than double Willis’ North America revenues in Employee Benefits, an already strong area of expertise that Willis has targeted for further growth. In addition, it will further strengthen key practice areas including personal lines, real estate, health care, environmental, construction, complex property and executive risk.”
The London-based broker is already the world’s third largest — behind Aon and Marsh. This “transaction will greatly strengthen Willis’ leadership as a middle market broker and reinforce its large account presence,” the bulletin noted. “It also will further expand the range of Willis’ specialty expertise and complement Willis’ substantial presence in the London market. With a more robust and diversified platform, the combined company will deliver greatly enhanced value to clients. ”
Willis Group Holdings CEO Joe Plumeri commented: “This dynamic transaction is all about growth. It’s truly transformational for our North America business. Only HRH has the scale and fit in attractive growth areas to take our business to the next level. HRH’s complementary strengths and geographic footprint will help us accelerate the performance momentum we’ve achieved through our Shaping our Future strategy.”
He also lauded HRH’s broker expertise, and indicated that the two companies “share the same passion for excellence and there’s no limit to what we can accomplish together.” Plumeri described the combination of Willis and HRH as the “best of both worlds for our clients,” combining global “reach and expertise” with “talent and local market presence.”
Vaughan indicated that the deal has the full support of HRH’s board of directors and its senior management team. “Our complementary footprint and Willis’ strength in important Global Specialties such as aerospace, energy, construction, marine, financial institutions and executive risk make our two companies an outstanding strategic fit,” he added.
Vaughan also noted that the two companies are “already developing detailed plans to make sure that the integration process is smooth and seamless for our clients.”
Plumeri and Vaughan will hold a joint conference call today, Monday, June 9, 2008, at 10:00 A.M. Eastern Time, to discuss the announcement with analysts. Interested parties may access the conference call by calling (888) 790-3153 (domestic) or +1 (517) 308-9033 (international) with a passcode of “Willis.” Media and individuals will be in a listen-only mode. Participants are asked to call in a few minutes prior to the call in order to register for the event.
Interested parties may also access the conference call in a listen-only mode via the Internet. To do so go to the “Investor Relations” section of the Willis and HRH web sites at: www.willis.com and www.hrh.com, respectively, and register for the call.
A replay of the call will be available through July 09, 2008 at 11:59 PM Eastern Time, by calling (888) 568-0743 (domestic) or + 1 (402) 998-0215 (international) with no passcode, or by accessing the web sites.
Source: Willis Group Holdings