Management consulting firm AON(AON) said on Wednesday that it would buy middle-market insurance broker NFP in a cash and stock deal worth $13.4 billion to tap the middle-market segment of insurance brokerage, wealth management, and retirement plan advisory.
The deal will be funded by $7 billion cash and $6.4 billion of Aon stock. Aon said it expects the deal to generate more than $2.8 billion in pre-tax gains, net of $400 million in transaction and integration costs. The deal is expected to close in mid-2024 and have a positive effect on adjusted earnings per share by 2027.
Aon CFO Christa Davies said, “The cash portion will be funded through a new debt raise of $5 billion in 2024 and the rest at the close of the deal while trying to keep the current credit rating.”
"The price does seem rich at 15 times the expected adjusted EBITDA, which is a bit above our valuation for Aon. However, Aon does expect $60 million in cost synergies over time," Brett Horn, senior equity analyst at Morningstar, wrote in a note.
The acquisition of NFP could help Aon expand its presence in the fast-growing middle market segment of insurance covering risks, benefits, retirement, and wealth plan advisory. Aon said that the NFP Chair and CEO Doug Hammond will remain in charge of business, and will report directly to Eric Andersen, president of Aon.
Shares of Aon were down 5.6% at $295.61 per share on Wednesday following the news.
Key Takeaways
- Aon reported that it will buy insurance broker NFP in a $13.4 billion cash and stock deal.
- The deal will help Aon expand its business in the middle market segment of insurance that covers risk, wealth plan advisory, benefits, and retirement.
- Aon expects the deal to generate more than $2.8 billion in pre-tax gains.
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