By Arathy S Nair
(Reuters) – U.S.-based Marsh & McLennan is buying British insurance and reinsurance broker Jardine Lloyd Thompson for 4.3 billion pound, the latest takeover in a sector which has been hit by recent losses.
Shares in JLT, which reorganised earlier this year into three divisions and has been preparing for a so-called hard British exit from the European Union in March, leapt by 32.3 percent, just shy of MMC’s cash offer of 1,915 pence per share.
The record $135 billion paid out by specialty insurance players for hurricanes, wildfires and other natural and man-made disasters in 2017 has driven up premiums and spurred takeovers.
JLT Chief Executive Dominic Burke, who has been building out its U.S. specialty business, said the deal to create a company with annual revenue of $17 billion had been struck quickly and was first discussed formally on Sept. 7.
“We were not looking to sell, We were approached by MMC and it was a compelling offer,” Burke, who will join MMC as vice chairman, said on a media conference call.
“We saw it as opportunity rather than threat.”
Other big deals so far this year include France’s AXA buying Bermuda-based XL Group for $15.3 billion in March, after American International Group said it would buy reinsurer Validus for around $5.6 billion.
Mutual insurer Covea offered to buy Scor, but was spurned by the French reinsurer, while there has also been private equity interest, with Apollo Global Management last month agreeing to buy Aspen Insurance Holdings.
MMC’s takeover of JLT, which implies an enterprise value of about 4.9 billion pounds, boosts a risk and insurance business whose revenue rose 7 percent to $7.63 billion in 2017, or just over half of the company’s total sales.
Panmure Gordon analyst Barrie Cornes said the offer was “fabulous” for JLT shareholder and heightened the possibility of other approaches in the sector.
But Canaccord Genuity analyst Joanna Parsons said a counterbid for JLT from Aon, the most likely contender, was unlikely given the scale of the premium offered by MMC.
MMC said the deal is expected to achieve synergies of about $250 million within three years of completion, adding that it expects to cut 2 to 5 percent of the combined company’s jobs.
The companies said investors representing 40.45 percent of JLT’s stock, including top shareholder Jardine Matheson Group, had already undertaken to support the tie-up.
And JLT’s independent directors, advised by JP Morgan Cazenove and Simon Robertson Associates, intend to recommend that shareholders vote in favour of the deal, they added.
JLT’s Burke said he expected the deal to close in the next six months and did not expect any regulatory or competition issues as MMC had agreed to take any steps needed.
Goldman Sachs was financial adviser to MMC, while Slaughter and May and Wachtell, Lipton, Rosen & Katz provided legal advice to MMC and Clifford Chance was legal adviser to JLT.
(Reporting by Arathy S Nair in Bengaluru; Additional reporting by Noor Zainab Hussain; Editing by Amrutha Gayathri/Keith Weir/Alexander Smith)