Aon: $4.9 Billion Hewitt Merger Is Largest in Company’s History

Insurance broker Aon Corp. said it's completed its $4.9 billion merger with Hewitt Associates Inc. to create Aon Hewitt, a provider of human resources solutions and services.

It's the largest merger in the history of Aon, said David Prosperi, vice president of global public relations for Aon. The next largest was the $1.4 billion merger with the reinsurance broker Benfield Group in November 2008.

The Hewitt merger, which triples the size of Aon's human resources and outsourcing business, was based on $50 a share for Hewitt stock, which is a 41% premium to Hewitt's closing stock price on July 9, the last trading day before the deal was announced. Aon has said it intended to pay 50% cash and 50% Aon stock.

Hewitt's Chief Executive Officer Russell P. Fradin signed a five-year contract to stay on as chairman and CEO of Aon Hewitt (BestWire, Sept. 13, 2010).

Aon Hewitt has annual revenue of $4.3 billion and 29,000 employees. Combined revenues for fiscal year 2009 are 49% from consulting services, 40% from benefits administration and 11% from human resources business process outsourcing.

The transaction is expected to generate about $355 million in annual cost savings across Aon Hewitt in 2013, primarily from reduction in back-office areas, public company costs, management overlap and leverage of technology platforms, the company said.

With $7.6 billion in annual revenue for 2009, Aon Corp. was the second-largest global broker, behind Marsh & McLennan Cos., which had $10.5 billion in total revenue, as ranked by Best's Review magazine (Best's Review, July 2010). In the previous year, Aon had been the top global broker, based on brokerage revenue.

Shares of Aon (NYSE: AON) were trading at $39.11 midday Oct. 4, down 0.43% from the previous close.

(By Meg Green, senior associate editor, BestWeek: [email protected])