- Keefe, Bruyette & Woods analyst Meyer Shields sees potential for Aon (AON -3.1%) to sell Willis Re in order to obtain EU regulator approval for its acquisition Willis Towers Watson (WLTW -3.1%).
- The European Commission is investigating the merger to decide if it will hurt competition with already limited participants, especially on "large multi-national" account brokerage, "space and aerospace manufacturing" and other unnamed risk classes in specific national markets, reinsurance brokerage, and employment-related retirement, health and welfare consulting administration.
- Shields's conversations with investors focus mostly on a potential sale of Willis Re, as "reinsurance brokerage is already enormously concentrated (the top-3 brokers probably account for almost 90% of global reinsurance brokerage revenues) and since market leaders AON and MMC both break out their reinsurance revenues, creating an easily-identifiable segment."
- Considers Arthur J. Gallagher (AJG -3.4%) the best fit for acquiring Willis Re.
- Sees a possible divestiture of Willis Re and use of proceeds to buy back shares boosting AON's 2022E EPS by 0.6% and 2023E EPS by 1.2%.
- If AJG were to buy Willis Re, it could increase AJG's 2022E EPS by 3.2% and 2023E EPS by 3.6%, Shields estimates.
- Previously (Dec. 21, 2020): Aon confirms Phase II review of WLTW merger by European Commission