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Insurance broker Aon has said it expects to pay up to $400m in additional costs, on top of a $1bn termination fee, for the cancellation of its takeover of rival Willis Towers Watson.
The two companies unexpectedly called off their megamerger earlier this week because of what Aon called an “impasse” with the US Department of Justice, which had sued to block the deal on competition grounds.
The all-share deal was agreed in March 2020 but attracted regulatory probes across the world. The EU gave it the green light earlier this month but the US trial brought by the DoJ was not due to start until November.
At its second-quarter results on Friday, Aon said it would “move forward independently, focused on delivering innovation on behalf of clients, growth opportunities for colleagues, and value creation for shareholders”.
The $1bn break fee plus around $350m to $400m in additional termination costs will be recognised in the third quarter, Aon said on Friday. It added that it did not expect “any further significant financial impacts” from the collapsed deal and chief financial officer Christa Davies told analysts that these costs were part of a “clean break” with Willis.
The US attorney-general said the decision to call off the merger was a “victory for competition for American businesses”. The DoJ’s suit warned that the deal could create a “Big Two” in insurance broking.
Jen Psaki, the White House press secretary, has also welcomed the termination of the deal, saying it was “in line with” the tougher approach to antitrust taken by President Biden’s administration.
Greg Case, Aon’s chief executive, defended the decision to call off the merger in an earnings call on Friday, saying the company was “not going to wait in a holding pattern well into 2022 to get this resolved”.
Aon said on Friday it would continue with the sale of its retiree health services business to Alight, but would cancel an agreement to sell its US retirement business. The disposals had been offered to address competition worries.
Aon’s shares have risen since the deal fell through, and analysts have backed it to prosper in the growing market for commercial insurance without the distraction of the merger. They were flat in early trading on Friday.
In the second quarter, it posted a 16 per cent year-on-year increase in revenues to $2.9bn, topping the $2.7bn consensus estimate provided by Capital IQ.