JLT Group to acquire Towers Watson’s reinsurance brokerage business for $250M

Acquisition expected to close by year-end

Jardine Lloyd Thompson Group plc will acquire the reinsurance brokerage business of Towers Watson for $250 million (USD).

Upon completion, Towers Watson’s reinsurance brokerage business will be merged with JLT’s reinsurance business, JLT Re. The new business will have combined revenues of $266 million and 700 people in 35 locations in 17 countries.

The combined business will be branded for a transitional period as JLT Towers Re.

Read: Profile of Steve Thomas, CEO of JLT Canada

Towers Watson’s reinsurance brokerage business generated revenues of $166 million and profit before tax of $26 million in the year ended June 2013, making it the 4th largest reinsurance broker in the world.

As part of the transaction, JLT Re and Towers Watson have entered into an Alliance Agreement that will ensure clients have continued access to Towers Watson’s risk consulting and software services.

This Agreement will also provide JLT Towers Re with continued use of Towers Watson’s proprietary actuarial models and software, alongside analytical and modelling capabilities that will be acquired with the business.

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“I am delighted to be able to welcome the Towers Watson team and their clients to JLT.  Towers Watson offers us a very strong reinsurance platform in the key North American market, as well as bringing further strength in the London Market and a leading analytical capability,” said Dominic Burke, Group chief executive of JLT, in a press release.

“We see a significant strategic opportunity through the merger of the two businesses to create a formidable new force and restore client choice to the reinsurance market. We are committed to investing in the business to enhance our client proposition and drive growth, as we have successfully done across the rest of the JLT Group in recent years.”

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Upon formal completion of the transaction, Ross Howard, who is currently head of Towers Watson’s reinsurance brokerage business, will become executive chairman of the merged operation.  Alastair Speare-Cole, currently CEO of JLT Re, will become CEO of the enlarged business.  Alan Griffin will step down as Chairman of JLT Re, but will retain a board and advisory role.

Read: 2013 reinsurance market report

The acquisition is subject to regulatory approvals and is expected to complete before the end of the year. The two businesses will be fully integrated over the course of 2014 and 2015.

Total transaction and integration costs are expected to be approximately $7 million and $20 million respectively. The acquisition will be made on a debt and cash free basis and financed from JLT’s cash resources and debt and is expected to be earnings accretive in the first full year following completion. The gross assets being acquired amount to approximately $106 million.

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